News Releases

WestJet Reports Second Quarter Results

Airline reports strong second quarter earnings amid a challenging
operating environment

CALGARY, July 30 /CNW/ - WestJet (TSX:WJA) today announced second quarter
net earnings of $30.2 million. This compared to $11.5 million reported in the
second quarter of 2007. Year to date, net earnings in 2008 were $82.7 million
compared to $41.4 million earned in the same six months of 2007.
The airline's second quarter 2007 net earnings were impacted by the
one-time non-recurring impairment loss related to costs previously capitalized
for the aiRES project. Excluding this impairment, earnings for the quarter
were $33.7 million; this represents a second quarter 2008 earnings decrease of
10.4 per cent. Year-to-date 2008 earnings improved 30.0 per cent when compared
to the adjusted $63.6 million earned in the first six months of 2007.
The airline's diluted earnings per share (EPS) for the second quarter of
2008 was 23 cents compared to nine cents in the same period last year.
Excluding the reservation-system impairment, diluted EPS for the quarter
decreased 11.5 per cent from an EPS of 26 cents in 2007. Year to date, diluted
EPS was 63 cents compared to 32 cents. Adjusted diluted EPS for the first half
of 2007 was 49 cents, representing a 2008 improvement of 28.6 per cent.
The airline reported a second quarter earnings before tax (EBT) margin of
7.1 per cent and an operating margin of 9.1 per cent. Year to date, WestJet's
EBT margin was 9.7 per cent and its operating margin was 11.4 per cent.
"We are very pleased with another quarter of results that will be among
the best in North America; we feel confident we can continue to grow
profitably and gain further market share domestically, transborder and
internationally," said Sean Durfy, WestJet President and CEO. "We continued to
implement our proven strategies of seasonally adjusting our capacity and
carefully selecting destinations and markets that benefit our business and our
guests. While we were not immune to the impacts of unprecedented and
unrelenting oil prices and the effects of economic uncertainty softening
demand, the hard work and dedication of over 7,300 WestJetters delivered
financial results that demonstrate the merits of our business strategy. I
thank them for continuing to deliver our WestJet experience to more and more
guests."
Second quarter revenue for 2008 was $616.0 million compared to $498.2
million in the second quarter of 2007, an improvement of 23.6 per cent. Year
to date, revenue was $1.215 billion compared to $968.9 million in 2007, an
increase of 25.4 per cent.

<<
Operational Highlights
-------------------------------------------------------------------------
Q2 Q2 % Year-to- Year-to- %
2008 2007 change date 2008 date 2007 change
-------------------------------------------------------------------------
Load factor 79.5% 80.9% (1.4) pts. 80.7% 81.0% (0.3) pts.
-------------------------------------------------------------------------
ASM (available
seat miles)
billions 4.235 3.488 21.4% 8.300 6.938 19.6%
-------------------------------------------------------------------------
RPM (revenue
passenger
miles)
billions 3.366 2.822 19.3% 6.697 5.620 19.2%
-------------------------------------------------------------------------
RASM (revenue
per available
seat mile)
cents 14.55 14.28 1.9% 14.64 13.97 4.8%
-------------------------------------------------------------------------
Yield (revenue
per revenue
passenger
mile) cents 18.30 17.65 3.7% 18.15 17.24 5.3%
-------------------------------------------------------------------------
CASM (cost per
available
seat mile)
cents(1) 13.22 12.32 7.3% 12.97 12.11 7.1%
-------------------------------------------------------------------------
CASM excluding
fuel and
employee profit
share(1) 8.13 8.72 (6.8%) 8.20 8.62 (4.9%)
-------------------------------------------------------------------------
(1) Excludes reservation system impairment of $31.9 million in the second
quarter of 2007.
>>

Sean Durfy continued, "The price of oil continues to have a significant
impact on our costs, as it has for all fuel-consuming sectors in the world
economy. Economic uncertainties in North America, as well as the higher cost
of air travel due to record fuel prices, are deterring some guests from
travelling.
"Where we truly continue to shine is in our CASM (excluding fuel and
employee profit share), which was down 6.8 per cent this quarter. At a time
when other airlines are required to introduce cost-cutting initiatives, our
true efficiencies are coming from the low-cost structure and philosophies we
have had in place since we began operations in 1996.
"We have taken delivery of one of the remaining two aircraft slated for
the second half of 2008, the second is arriving in the fourth quarter, for a
2008 total of 77 Boeing Next-Generation 737s. Capacity will increase 18 per
cent in the third quarter, with a more modest 10 per cent increase in the
fourth quarter.
"While we recognize that the unpredictable nature of our current
operating environment may impact demand, we remain committed to our growth
strategy. We recently announced that a code-share and distribution agreement
is in the works with Southwest Airlines. This will allow us to meet our stated
goal of gaining 20 to 25 per cent of the transborder market share over the
next five years - demonstrating our commitment to executing our business plan
and supporting the long-term positive outlook for our airline."
WestJet also reported second quarter operational performance. The airline
calculates operational performance based on the U.S. Department of
Transportation's standards for the North American airline industry.

<<
-------------------------------------------------------------------------
Q2 Q2 Year-to- Year-to-
2008 2007 change date 2008 date 2007 change
-------------------------------------------------------------------------
On-time
performance 84.3% 88.5% (4.2) pts. 77.2% 82.3% (5.1) pts.
-------------------------------------------------------------------------
Completion
rate 99.0% 99.4% (0.4) pts. 98.6% 98.9% (0.3) pts.
-------------------------------------------------------------------------
Bag ratio 3.32 3.47 (4.3%) 4.23 4.37 (3.2%)
-------------------------------------------------------------------------
>>

Management's Discussion and Analysis of Financial Results

Advisories

The following Management's Discussion and Analysis of Financial Results
(MD&A), dated July 29, 2008, should be read in conjunction with the unaudited
consolidated financial statements and notes thereto as at and for the three
and six months ended June 30, 2008 and 2007, as well as the audited
consolidated financial statements, notes thereto and MD&A included in the
Annual Report as at and for the year ended December 31, 2007. For a detailed
description of risks, uncertainties and critical accounting estimates, please
refer to the "Risks and Uncertainties" and "Accounting" sections in the 2007
annual MD&A dated February 22, 2008. The consolidated financial statements
have been prepared in accordance with Canadian generally accepted accounting
principles (GAAP). All amounts in the following MD&A are stated in Canadian
dollars unless otherwise stated. Certain prior-period balances in the
consolidated financial statements have been reclassified to conform to current
period's presentation. Additional information relating to WestJet Airlines
Ltd. (WestJet, we, us or our), including Annual Information Forms and
financial statements, is located on SEDAR at www.sedar.com. An additional
advisory with respect to forward-looking information is set out below, and the
use of non-GAAP measures is set out at the end of this MD&A under "Non-GAAP
Measures".

Forward-looking information

Certain information set forth in this document, including management's
assessment of WestJet's future plans and operations, contains forward-looking
statements. These forward-looking statements typically contain the words
"anticipate", "believe", "estimate", "intend", "expect", "may", "will",
"should" or other similar terms. By their nature, forward-looking statements
are subject to numerous risks and uncertainties, some of which are beyond
WestJet's control, including the impact of general economic conditions,
changing domestic and international industry conditions, volatility of fuel
prices, terrorism, currency fluctuations, interest rates, competition from
other industry participants (including new entrants, and generally as to
capacity fluctuations and pricing environment), labour matters, government
regulation, stock-market volatility and the ability to access sufficient
capital from internal and external sources. Readers are cautioned that
management's expectations, estimates, projections and assumptions used in the
preparation of such information, although considered reasonable at the time of
preparation, may prove to be imprecise and, as such, undue reliance should not
be placed on forward-looking statements. WestJet's actual results, performance
or achievements could differ materially from those expressed in, or implied
by, these forward-looking statements.

Definition of key operating indicators

Our key operating indicators are airline industry metrics which are
useful in assessing the operating performance of an airline.

Available Seat Miles (ASM): A measure of total passenger capacity,
calculated by multiplying the total number of seats available for sale by the
total distance flown.

Revenue Passenger Miles (RPM): A measure of passenger traffic, calculated
as the number of revenue passengers, multiplied by the total distance flown.

Load Factor: A measure of total capacity utilization, calculated as the
proportion of total available seat miles occupied by revenue passengers.

Yield (Revenue per Revenue Passenger Mile): A measure of unit revenue,
calculated as the gross revenue generated per revenue passenger mile.

Revenue per Available Seat Mile (RASM): Total revenue divided by
available seat miles.

Cost per Available Seat Mile (CASM): Operating expenses divided by
available seat miles.

Cycle: One flight counted by the aircraft leaving the ground and landing.

Average Stage Length: The average distance of a flight between take-off
and landing.

Utilization: Operating hours per day per operating aircraft.

OVERVIEW

In the second quarter of 2008, we delivered strong financial results and
continued execution on our strategy despite significant pressures on the
airline industry from record fuel prices and an uncertain economic
environment. On July 8, 2008, we announced a Memorandum of Understanding (MOU)
to build a distribution and code-share agreement with Southwest Airlines,
based in the United States, further demonstrating delivery of our strategic
plan. The distribution component of the MOU will provide us with significant
point of sale presence in the United States by enabling our flights to be
displayed and sold on Southwest's website. Subsequently, the code-share
agreement will provide both airlines, by late 2009, with the ability to
commence code-share flights across both networks. We believe the MOU marks an
important step forward for our guests and their ability to fly to more
destinations in the United States conveniently and cost effectively.

Quarterly Highlights

<<
- Increased total revenues to $616.0 million for the three months ended
June 30, 2008, up 23.6 per cent over the second quarter of 2007 from
$498.2 million.

- Increased RASM by 1.9 per cent to 14.55 cents in the second quarter
of 2008, from 14.28 cents in the same period of 2007, while
increasing capacity by 21.4 per cent.

- Decreased CASM, excluding fuel and employee profit share, by 6.8 per
cent to 8.13 cents for the second quarter of 2008 compared to 8.72
cents, excluding the reservation system impairment in the second
quarter of 2007.

- Realized an earnings before tax margin of 7.1 per cent for the three
months ended June 30, 2008, down 2.6 points from the second quarter
of 2007, excluding the second quarter reservation system impairment
in 2007.

- Recorded net earnings of $30.2 million in the second quarter of 2008
from $11.5 million in the same quarter of 2007. Excluding the second
quarter reservation system impairment in 2007, net earnings decreased
by 10.4 per cent from $33.7 million in the second quarter of 2007.

- Diluted earnings per share increased by 155.6 per cent to $0.23 in
the second quarter of 2008 from $0.09 in the same quarter of 2007.
Adjusted for the second quarter reservation system impairment in
2007, our diluted earnings per share decreased by 11.5 per cent from
2007.

- Assumed delivery of two new leased aircraft, increasing our total
registered fleet to 75.

- Generated cash flows from operations of $125.9 million for the three
months ended June 30, 2008 from $148.9 million in the same period of
2007.
>>

In the current operating environment of the airline industry, our people
remain one of our key success factors. The combination of our high-value,
low-cost business model and the commitment of our WestJetters has positioned
us well in the North American airline industry. Our people continue to deliver
superior guest experience and build our brand in the face of external
pressures within the industry.

<<
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operational Highlights Three Months Ended June 30
-------------------------------------------------------------------------
2008 2007 Change
-------------------------------------------------------------------------
ASMs 4,234,625,866 3,488,485,738 21.4%
RPMs 3,365,923,157 2,822,372,023 19.3%
Load factor 79.5% 80.9% (1.4) pts
Yield (cents) 18.30 17.65 3.7%
RASM (cents) 14.55 14.28 1.9%
CASM (cents)(i) 13.22 12.32 7.3%
CASM, excluding fuel and
employee profit share (cents)(i) 8.13 8.72 (6.8%)
Fuel consumption (litres) 205,847,264 173,222,765 18.8%
Fuel costs/litre (cents) 103.77 69.43 49.5%
Segment guests 3,546,184 3,229,146 9.8%
Average stage length (miles) 906 834 8.6%
Number of full-time equivalent
employees at period end 6,156 5,350 15.1%
-------------------------------------------------------------------------
Fleet size at period end 75 65 15.4%

Operational Highlights Six Months Ended June 30
-------------------------------------------------------------------------
2008 2007 Change
-------------------------------------------------------------------------
ASMs 8,299,617,667 6,937,533,552 19.6%
RPMs 6,696,736,600 5,619,542,312 19.2%
Load factor 80.7% 81.0% (0.3) pts
Yield (cents) 18.15 17.24 5.3%
RASM (cents) 14.64 13.97 4.8%
CASM (cents)(i) 12.97 12.11 7.1%
CASM, excluding fuel and
employee profit share (cents)(i) 8.20 8.62 (4.9%)
Fuel consumption (litres) 408,002,930 345,381,068 18.1%
Fuel costs/litre (cents) 93.46 66.73 40.1%
Segment guests 7,015,589 6,269,735 11.9%
Average stage length (miles) 911 846 7.7%
Number of full-time equivalent
employees at period end 6,156 5,350 15.1%
Fleet size at period end 75 65 15.4%
-------------------------------------------------------------------------
(i) Excludes reservation system impairment of $31.9 million in the second
quarter of 2007.
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

Despite record fuel prices, we recorded net earnings of $30.2 million and
diluted earnings per share of $0.23.
During the second quarter of 2008, total revenues increased by 23.6 per
cent to $616.0 million compared to $498.2 million in the same period of 2007.
The primary drivers of this growth were additional seat capacity in our
network, capture of additional guest traffic and improved yield.
Notwithstanding our capacity increase of 21.4 per cent, our RASM for the first
quarter of 2008 was 14.55 cents, up from 14.28 cents in the same period in
2007.
On May 13, 2008, in light of record fuel prices, we introduced a fuel
surcharge of $20, $30 and $45 on all short-, medium- and long-haul flights,
respectively, in order to partially offset the effect of unprecedented fuel
prices.
Our load factor was down from 80.9 per cent in the second quarter of 2007
to 79.5 per cent for the second quarter of 2008 due to a softening in demand
for air travel. However, we did see our largest capacity increase since
November 2006 for the month of June and transported 9.8 per cent more guests
in the quarter.
To see the Quarterly Load Factor chart, click here:
http://media3.marketwire.com/docs/728wja_qlf.pdf.
Continued high fuel prices have driven aggressive actions within the
North American airline industry. During the first half of 2008, many airlines
announced reductions in capacity and employee layoffs. As well, certain
airlines have either grounded or announced plans to ground aircraft in order
to combat the rising costs of fuel, with some airlines filing for bankruptcy
protection or commencing merger discussions. Further, aggressive ancillary
revenue initiatives were announced by some airlines in response to record fuel
prices, such as charging for checked baggage. Although fuel costs are
negatively impacting net earnings, we remain committed to our strategic growth
plan. We will continue to take delivery of our fuel-efficient Boeing aircraft
and expand our network with new domestic and sun destinations. In addition to
the fuel-efficient Next-Generation aircraft we fly, we are a leader in the
adoption of Blended Winglet Technology, which significantly reduces fuel burn
and emissions. These fuel-saving strategies, combined with onboard
navigational technology and procedures designed to reduce flight times and
emissions, are key components to our strategy in combating rising fuel costs.
Recently, we announced the introduction of four new international
destinations: Bridgetown, Barbados and La Romana, Dominican Republic, as well
as the Mexican destinations of Cancun and Puerto Vallarta. Non-stop seasonal
service to Barbados and La Romana will commence in the fourth quarter of 2008.
The introduction of service to Kamloops, beginning in December 2008, was also
announced in the second quarter of 2008. These announcements bring our
scheduled destinations to 51: 28 domestic, 12 U.S. and 11 international.
Strong cost control has always been a core strategy and remains integral
to combating the impact of significantly higher fuel prices on our net
earnings. Adjusted for the second quarter reservation system impairment in
2007, our CASM increased by 7.3 per cent in the second quarter of 2008 to
13.22 cents from 12.32 cents in the same quarter of 2007. This increase almost
entirely resulted from significantly higher fuel costs. Excluding fuel and
employee profit share and the reservation system impairment in the second
quarter of 2007, our CASM has decreased to 8.13 cents in the second quarter of
2008 from 8.72 cents in the second quarter of 2007, an improvement of 6.8 per
cent. This decrease was achieved primarily as a result of a longer average
stage length, increased aircraft utilization, cost dilution over a greater
number of available seat miles and a stronger Canadian dollar in comparison to
the same period in 2007.
As at June 30, 2008, our balance sheet was strong, as evidenced by our
cash and cash equivalents balance of $812.0 million, an increase of 24.2 per
cent from December 31, 2007. Our healthy liquidity position is demonstrated by
our current ratio of 1.20, which remained relatively flat compared to 1.22 as
at December 31, 2007. Additionally, our adjusted debt-to-equity ratio was
reduced to 1.95 from 2.07 as at December 31, 2007.
During the second quarter of 2008, we assumed delivery of two leased
737-700s, increasing our total registered fleet to 75 aircraft. Additionally,
we signed an agreement with Boeing in the second quarter of 2008 to purchase
four new aircraft, with two scheduled for delivery in 2010 and two in 2011. We
continue to operate one of the youngest fleets of any large North American
commercial airline at an average age of 3.5 years.

SELECTED QUARTERLY UNAUDITED FINANCIAL INFORMATION

<<
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months Ended
-------------------------------------------------------------------------
($ in thousands, Jun. 30 Mar. 31 Dec. 31 Sept. 30
except per share data) 2008 2008 2007 2007
-------------------------------------------------------------------------
Total revenues $ 616,000 $ 599,348 $ 552,004 $ 606,242
Net earnings $ 30,193 $ 52,506 $ 75,359 $ 76,070
Basic earnings per share $ 0.23 $ 0.40 $ 0.58 $ 0.59
Diluted earnings per share $ 0.23 $ 0.40 $ 0.57 $ 0.58
-------------------------------------------------------------------------
-------------------------------------------------------------------------

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months Ended
-------------------------------------------------------------------------
Jun. 30 Mar. 31 Dec. 31 Sept. 30
2007 2007 2006 2006
-------------------------------------------------------------------------
Total revenues $ 498,200 $ 470,710 $ 446,720 $ 497,339
Net earnings $ 11,549 $ 29,855 $ 26,651 $ 52,810
Basic earnings per share $ 0.09 $ 0.23 $ 0.21 $ 0.41
Diluted earnings per share $ 0.09 $ 0.23 $ 0.21 $ 0.41
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

Our business is seasonal in nature with varying levels of activity
throughout the year. We experience increased domestic travel in the summer
months (second and third quarters) and more demand for sun destinations over
the winter period (fourth and first quarters). With the introduction of
transborder and international destinations, we have been able to alleviate
some of the effects of seasonality on our net earnings.
In the quarter ended December 31, 2007, our reported net earnings of
$75.4 million were positively impacted by a non-cash adjustment in the amount
of $33.7 million, or 25 cents per share, to future income tax expense as a
result of the enactment of income tax rate reductions.
In the quarter ended June 30, 2007, our reported net earnings of $11.5
million were negatively impacted by a non-cash impairment of $31.9 million
($22.2 million after tax or 17 cents per share) for the capitalized costs
associated with our reservation system project.

RESULTS OF OPERATIONS
Revenue

<<
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months Ended June 30 Six Months Ended June 30
-------------------------------------------------------------------------
($ in thousands) 2008 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Guest revenues 557,305 449,312 24.0% 1,083,005 840,044 28.9%
Charter and other
revenues 58,695 48,888 20.1% 132,343 128,866 2.7%
-------------------------------------------------------------------------
616,000 498,200 23.6% 1,215,348 968,910 25.4%
-------------------------------------------------------------------------
RASM (cents) 14.55 14.28 1.9% 14.64 13.97 4.8%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

During the three months ended June 30, 2008, total revenues increased by
23.6 per cent to $616.0 million compared to $498.2 million in the same period
of 2007. For the six months ended June 30, 2008, total revenues increased by
25.4 per cent to $1,215.3 million from $968.9 million in the same period of
2007. For the second quarter and first half of 2008, our RASM increased by 1.9
per cent and 4.8 per cent to 14.55 cents and 14.64 cents, respectively,
compared to the prior-year periods. We are encouraged by the progress made in
improving RASM when the increase in average stage length of 8.6 per cent is
considered. These increases in total revenues and RASM were driven primarily
by additional capacity and improved yield through the newly implemented fuel
surcharge.
The second quarter is a transitional period where a large portion of our
transborder, international and charter capacity is shifted back into our
domestic markets. During the second quarter of 2008, we transitioned
approximately 40 per cent of our total network capacity from our winter
schedule back into Canada. Further, this capacity shift occurred as we
experienced a 21.4 per cent year-over-year quarterly capacity increase.
Additionally, as the Easter holiday in 2008 fell in the month of March, versus
April in 2007, RASM for the second quarter of 2008 was negatively impacted,
offsetting the favourable impact from the first quarter of 2008. Also
affecting our RASM is our increase in average stage length for the three and
six months ended June 30, 2008 of 8.6 per cent and 7.7 per cent, respectively.
As average stage length increases, our revenue per mile decreases over a
larger number of miles flown. We have, however, seen a positive impact on our
RASM as a result of fuel surcharges. We continue to monitor the impact of the
higher fuel costs and will adjust the fuel surcharge if necessary in the
future. Fuel surcharges are included in guest revenues.
Guest revenues from our scheduled flight operations increased by 24.0 per
cent for the three months ended June 30, 2008 to $557.3 million from $449.3
million and 28.9 per cent for the six months ended June 30, 2008 to $1,083.0
million from $840.0 million as compared to the prior year. These changes are
attributable to capacity growth, fuel surcharges and increased WestJet
Vacations air revenue.
Charter and other revenues include charter, cargo, ancillary, WestJet
Vacations non-air and other revenue. Our charter and other revenues increased
on a dollar basis by 20.1 per cent to $58.7 million in the second quarter of
2008 from $48.9 million in the same quarter of 2007. Additionally, charter and
other revenues are up 2.7 per cent for the six months ended June 30, 2008. The
quarter-over-quarter improvement was driven primarily by a significant
increase in WestJet Vacations non-air revenue and improvements in charter
revenue due to increased fuel surcharges for third party carriers. The
year-to-date increase in charter and other revenues was mainly due to an
increase in WestJet Vacations non-air and ancillary revenue, offset by a
decrease in charter revenue due to increased capacity allocated to scheduled
sun destinations during the winter months, as depicted in the graph below.
To see the Charter and Scheduled Transborder and International as a
Percentage of Total ASMs chart, click here:
http://media3.marketwire.com/docs/728wja_charter.pdf.
Ancillary revenues, which include service fees, onboard sales, partner
and program revenue, increased by 8.2 per cent and 7.3 per cent for the second
quarter and first half of 2008 to $21.2 million and $41.2 million,
respectively, over the same periods of 2007. For the three months ended June
30, 2008, ancillary revenue per guest decreased from the same period of 2007
to $6.15 per guest from $6.25. Similarly, ancillary revenue per guest for the
first half of 2008 declined by 5.4 per cent to $6.11 from $6.46 per guest in
the first half of 2007. These decreases were largely attributable to the
discontinuation of the Unaccompanied Minor program in April 2008, as well as
lower revenue due to the announced termination of our BMO Mosaik MasterCard
partnership.
We continually review our fee structure and as a result, we announced
increases to our change and cancellation fees, same-day cancellation fees and
certain buy-on-board product prices. As well, we introduced a lower weight
allowance for all checked baggage effective July 3, 2008. We also announced
the introduction of a new seat selection option on July 16, 2008, which for a
small fee, will allow guests to select their seat at the time of booking. This
service was not previously offered. Even with these changes to our fee
structure, our fees remain some of the lowest in the airline industry.

Expenses

<<
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
-------------------------------------------------------------------------
CASM (cents) 2008 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Aircraft fuel 5.04 3.45 46.1% 4.59 3.32 38.3%
Airport operations 1.94 2.06 (5.8%) 2.00 2.12 (5.7%)
Flight operations and
navigational charges 1.66 1.84 (9.8%) 1.67 1.82 (8.2%)
Marketing, general and
administration 1.14 1.23 (7.3%) 1.16 1.19 (2.5%)
Sales and distribution 0.97 0.98 (1.0%) 0.98 0.93 5.4%
Depreciation and
amortization 0.80 0.89 (10.1%) 0.80 0.89 (10.1%)
Inflight 0.64 0.60 6.7% 0.63 0.58 8.6%
Aircraft leasing 0.51 0.57 (10.5%) 0.49 0.55 (10.9%)
Maintenance 0.47 0.55 (14.5%) 0.47 0.54 (13.0%)
Employee profit share 0.05 0.15 (66.7%) 0.18 0.17 5.9%
-------------------------------------------------------------------------
13.22 12.32 7.3% 12.97 12.11 7.1%
-------------------------------------------------------------------------
CASM, excluding fuel and
employee profit share(1) 8.13 8.72 (6.8%) 8.20 8.62 (4.9%)
-------------------------------------------------------------------------
(1) Excludes reservation system impairment of $31.9 million in the second
quarter of 2007.
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

During the second quarter of 2008, fuel continued to increase at
unrelenting and unprecedented rates. As a result, our CASM increased for both
the three and six months ended June 30, 2008 to 13.22 cents and 12.97 cents
from 12.32 cents and 12.11 cents for the same periods of 2007, respectively.
The underlying low-cost structure of our business model plays an important
role in this period of record fuel prices and challenges in the airline
industry, as we are able to operate with lower costs than our competitors. Our
CASM, excluding fuel and employee profit share, decreased by 6.8 per cent for
the three months ended June 30, 2008, and 4.9 per cent for the first six
months of 2008 as compared to the same periods in 2007, excluding the
reservation system impairment of $31.9 million in 2007.
A longer average stage length during the three and six months ended June
30, 2008 has helped reduce our CASM, excluding fuel and employee profit share.
During the second quarter, our average stage length increased by 8.6 per cent
to 906 miles from 834 miles in the same period of 2007. For the first half of
2008, average stage length increased to 911 miles from 846 miles, an increase
of 7.7 per cent over the first half of 2007. The increase in our average stage
length is attributable to additional transborder and international departures,
new routes and new destinations. As average stage length increases, cost
efficiencies are gained, and we achieve a lower cost per mile because our
fixed costs of operations are allocated over an increasing number of miles
flown. Likewise, longer-haul routes typically achieve higher fuel economy, as
we are able to absorb the higher costs of fuel for take-offs and landings over
a longer trip length.
With our focus on productivity and cost control, our fleet optimization
continued during 2008. In the second quarter, we increased our aircraft
utilization by 24 minutes to 12.2 operating hours per day compared to 11.8
operating hours per day in the same period of 2007. We saw a similar
improvement during the first six months of 2008 to 12.3 operating hours per
day from 12.1 operating hours per day, an increased utilization of 12 minutes.
During the three and six months ended June 30, 2008, we grew capacity,
measured in available seat miles, to 4.2 billion ASMs and 8.3 billion ASMs as
compared to 3.5 billion ASMs and 6.9 billion ASMs in the same periods of 2007.
The dilution of costs over a greater number of available seat miles, coupled
with the stronger Canadian dollar, continued to help reduce our CASM,
excluding fuel and employee profit share, in the second quarter and first half
of 2008.

Aircraft fuel

Fuel price increases continued to significantly impact our CASM during
the three and six months ended June 30, 2008, representing approximately 38
per cent of total operating costs for the second quarter of 2008 as compared
to 26 per cent for the same quarter of 2007. For the first half of 2008, fuel
comprised approximately 35 per cent of total operating costs versus 26 per
cent for the same period of 2007. Jet fuel prices reached US $175 per barrel
during the month of May 2008, setting a record high for the first half of
2008. During the second quarter of 2008, the average market price for jet fuel
was US $155.91 per barrel compared to US $87.37 per barrel in the same quarter
of 2007, an increase of 78.4 per cent, as depicted in the graph below. As a
result, our fuel cost per ASM reached 5.04 cents and 4.59 cents for the three
and six months ended June 30, 2008, respectively, versus 3.45 cents and 3.32
cents for the same periods of 2007. For the second quarter of 2008, this
represents a 46.1 per cent increase in our fuel cost per ASM and 38.3 per cent
increase for the first six months of 2008. The increase in fuel cost per ASM
was offset partially due to favourable foreign exchange adjustments.
To see the Average Market Price of Jet Fuel chart, click here:
http://media3.marketwire.com/docs/728wja_jetfuel.pdf.
Fuel costs per litre increased by 49.5 per cent to $1.04 per litre in the
second quarter of 2008 from $0.69 per litre in the second quarter of 2007.
This differs from our estimate of $1.01 per litre in the first quarter of 2008
due to further escalations in the price of jet fuel during the second quarter
of 2008. Similarly, we saw fuel costs per litre increase for the first half of
2008 by 40.1 per cent compared to the first half of 2007. These increases in
our fuel costs per litre were offset by approximately 20 per cent and 25 per
cent for the three and six months ended June 30, 2008, respectively, due to
the strengthening Canadian dollar relative to the same periods of 2007. To
further demonstrate the impact of rising fuel prices, we estimate that a
round-trip flight for one guest would cost us approximately $151 in average
fuel costs, as compared to the second quarter of 2007 at $95 in average fuel
costs per guest.
To mitigate our exposure to fluctuations in jet fuel prices, we
periodically use short-term financial and physical derivatives. As at, and for
the three and six months ended June 30, 2008, we had no outstanding fuel
hedges. Subsequent to June 30, 2008, we have entered into a mixture of
costless collar structures with an approximate average crude oil call price of
US $159 per barrel and an average crude oil put price of US $128 per barrel,
and fixed swap agreements at an approximate average crude oil price of US $136
per barrel to hedge a portion of our anticipated jet fuel purchases to the end
of September 2008. These contracts settle monthly, and as of July 25, 2008, we
have hedged approximately 40 per cent of our July fuel requirements and
approximately 65 per cent and 50 per cent of our forecasted fuel requirements
for August and September, respectively.

Airport operations

Airport operations expense consists primarily of airport landing and
terminal fees and ground handling costs for our scheduled service and charter
operations. These expenditures typically fluctuate depending on the
destinations, aircraft weights, inclement weather conditions and number of
guests. Transborder flights are more expensive than domestic flights due to
increased charges from domestic airports for higher terminal and pre-clearance
fees from transborder flights. Also included in airport operations are costs
relating to flight cancellations and accommodations for displaced guests for
situations beyond our control, such as inclement weather conditions. Because
the majority of expenses are levied on a per-flight basis, the cost per
departure is also a relevant performance driver for airport operations.
For the three months ended June 30, 2008, our cost per available seat
mile for airport operations decreased by 5.8 per cent to 1.94 cents from 2.06
cents in the same period of 2007. Similarly, year-to-date cost per available
seat mile was 2.00 cents as compared to 2.12 cents in the same period of 2007,
representing a decrease of 5.7 per cent. These decreases were primarily
attributable to dilution of costs over a greater number of available seat
miles. Our cost per departure increased by 2.7 per cent and 2.5 per cent in
the second quarter and first half of 2008, respectively, as compared to the
same periods of 2007. These increases were primarily due to higher costs for
glycol due to the harsh Canadian winter, higher average ground handling rates
and fees and higher meal, hotel and transportation costs for displaced guests.
Additionally, our employee expenses are higher on a per-departure basis for
these periods due to annual merit increases in May 2008.

Flight operations and navigational charges

For the second quarter of 2008, our flight operations and navigational
charge per ASM was 1.66 cents compared to 1.84 cents in the same quarter of
2007, a decrease of 9.8 per cent. For the first half of 2008, our cost per ASM
for flight operations and navigational charges decreased by 8.2 per cent to
1.67 cents from 1.82 cents in the first half of 2007. For both periods, the
decreases were largely attributable to lower NAV CANADA fees and pilot
stock-based compensation, as well as the dilutive impact of our capacity
growth.
Flight operations expenses consist primarily of pilot compensation,
including salaries, training and stock-based compensation, as well as salaries
and benefits for operations control centre staff. Pursuant to the 2006 pilot
agreement, pilots may elect to receive a certain amount of cash in lieu of a
selected portion of their stock options. For the second quarter of 2008,
stock-based compensation expense relating to pilots' stock options decreased
by 38.1 per cent, to $2.6 million from $4.2 million in the second quarter of
2007, as more pilots elected to receive cash in lieu of stock options. During
the first half of 2008, pilots' stock-based compensation expense related to
options was $6.1 million, a decrease of 34.4 per cent from $9.3 million in the
first half of 2007. This decrease was partially offset by an increase in
salary costs due to this cash payout in the first quarter of 2008 compared to
the same period in 2007.
Domestic air navigational charges relating to air traffic control are
administered by NAV CANADA on a per-flight basis. These fees are predominantly
driven by the size of aircraft and distance flown. For the second quarter of
2008, navigational charges have decreased on a CASM basis by 11.4 per cent to
0.78 cents from 0.88 cents in the second quarter of 2007. This decrease was
primarily due to the dilutive impact of our 21.4 per cent capacity growth and
a reduction in NAV rates that was effective September 2007. For the first six
months of 2008, navigational charges decreased by 9.6 per cent to 0.75 cents
per ASM from 0.83 cents per ASM in the same period of 2007. As our number of
transborder and international departures have increased during the first half
of 2008 over the same period of 2007, our NAV fees decreased during this
period. Of our total departures, transborder and international routes
comprised 16.8 per cent in the first six months of 2008 versus 14.5 per cent
of total departures in the first half of 2007, an increase of 2.3 points. Our
NAV CANADA charges decrease as we fly to more destinations outside of Canadian
airspace.

Inflight

Our inflight expense consists mainly of flight attendant salaries,
benefits, travel costs and training. During the second quarter of 2008, our
inflight cost per available seat mile increased to 0.64 cents from 0.60 cents
in the same period of 2007, an increase of 6.7 per cent. Similarly, there was
an increase of 8.6 per cent for the first half of 2008 to 0.63 cents from 0.58
cents in the same period of 2007. These increases for both periods were
attributable to merit and market increases to flight attendant salaries, as
well as an increase in the number of flight attendants. We also incurred
additional hotel and per diem costs relating to additional transborder and
international routes. As our average stage length increases, there are fewer
cycles returning in the same day, resulting in higher accommodation costs for
our inflight crews.

Maintenance

Our maintenance costs per available seat mile were 0.47 cents in the
second quarter of 2008, representing a decrease of 14.5 per cent from 0.55
cents per available seat mile in the second quarter of 2007. Similarly, our
year-to-date maintenance costs per available seat mile decreased by 13.0 per
cent to 0.47 cents from 0.54 cents in the first half of 2007. These favourable
decreases resulted from the stronger Canadian dollar, as approximately 40 per
cent of our maintenance costs were denominated in US dollars, and the dilutive
effect of our increased capacity of 21.4 per cent and 19.6 per cent for the
three and six months ended June 30, 2008, respectively. Partially offsetting
these decreases were an increased number of aircraft coming off warranty
during the first half of 2008 as compared to the same period in 2007, as well
as five events requiring engine maintenance in the second quarter of 2008.
At June 30, 2008, 32 out of 75 aircraft were off warranty compared to 20
out of 65 aircraft at June 30, 2007. We expect our maintenance costs per
available seat mile to increase as more aircraft come off warranty.

Compensation

Our compensation philosophy is designed to align corporate and personal
success. We have designed a compensation plan whereby a portion of our
expenses are variable and are tied to our financial results. Our compensation
strategy encourages employees to become owners in WestJet, which inherently
creates a personal vested interest for our employees in our accomplishments.

Salaries and benefits

For the second quarter of 2008, salaries and benefits increased by 19.4
per cent to $89.2 million from $74.7 million in the second quarter of 2007.
For the first half of 2008, salaries and benefits were $176.8 million as
compared to $146.7 million, an increase of 20.5 per cent. These increases were
due to market and merit increases in base salaries and benefits, as well as
the greater number of WestJetters employed versus a year ago. Salaries and
benefits expense for each department is included in the respective
department's operating expense line item.

Employee profit share

All employees are eligible to participate in the employee profit sharing
plan. As the profit share system is a variable cost, employees will be
generously rewarded during good years. Conversely, the amount distributed to
employees is reduced and adjusted in less profitable times. Our profit share
expense for the quarter ended June 30, 2008 was $2.2 million, a 59.3 per cent
decrease from $5.4 million for the same quarter of 2007. This variance was
directly attributable to the lower earnings eligible for profit share due to
higher fuel costs. For the first six months of 2008, profit share expense was
$15.3 million as compared to $11.6 million in the first half of 2007, an
increase of 31.9 per cent.

Employee Share Purchase Plan

Our Employee Share Purchase Plan (ESPP) allows employees to participate
in WestJet's success. WestJetters may contribute up to 20 per cent of their
base salaries in the ESPP, and as at June 30, 2008, contributed an average of
15 per cent. We match contributions for every dollar contributed by employees.
Our matching expense for the period ended June 30, 2008 was $10.8 million, a
25.6 per cent increase from $8.6 million for the same quarter of 2007.
Similarly, our matching expense increased by 27.0 per cent in the first half
of 2008 compared to the first half of 2007, increasing to $20.7 million from
$16.3 million, respectively. Of our eligible employees, 83 per cent
participated in the ESPP as at June 30, 2008. The additional expense for both
periods was driven by an increase in WestJetters over the same periods of
2007.

Stock options

Pilots, executives and certain non-executive employees participate in
stock option plans. The fair value of these options, as determined by the
Black-Scholes option pricing model, is expensed over the vesting period.
Stock-based compensation expense related to stock options for the quarter
ended June 30, 2008 was $3.4 million compared to $5.4 million in the same
quarter of 2007, a decrease of 37.0 per cent. For the first half of 2008,
stock-based compensation expense for stock options was $7.6 million, a
decrease of 29.6 per cent from $10.8 million in the first half of 2007. The
primary reason for the decrease in stock option expense relates to pilots
electing to receive a certain amount of cash in lieu of a selected portion of
their stock options, which is partially offset by an increase to salary costs.

2008 Executive Share Unit Plan

Senior executive officers participate in the 2008 Executive Share Unit
Plan whereby they receive Restricted Share Units (RSU) and Performance Share
Units (PSU). Each RSU and PSU entitles the executive to receive payment upon
vesting in the form of voting shares. We determine compensation expense for
the 2008 RSUs based on the fair market value of our voting shares on the date
of grant. Compensation expense for RSUs is recognized in earnings on a
straight-line basis over the three-year vesting period. The value of the PSUs
is based on the fair market value of our voting shares on the date of grant.
PSUs time vest at the end of a three-year term and incorporate performance
criteria based upon achieving the compounded average diluted earnings per
share growth rate targets established at the time of grant. For the three and
six months ended June 30, 2008, a total of $0.2 million and $0.5 million of
compensation expense is included in marketing, general and administration
expense related to the 2008 Executive Share Unit Plan.

Foreign exchange

The foreign exchange gains and losses that we realize are largely
attributable to the effect of the changes in the value of the Canadian dollar,
relative to the US dollar, on our US-denominated net monetary assets over the
respective periods. These assets, totalling approximately US $116.9 million at
June 30, 2008 (December 31, 2007 - $103.4 million), consist of mainly
US-dollar cash and cash equivalents and security deposits on various leased
and financed aircraft. We hold US-denominated cash and short-term investments
to reduce the foreign currency risk inherent in our US-dollar expenditures. We
reported foreign exchange gains of $0.1 million and $4.0 million during the
three and six months ended June 30, 2008, respectively, on the revaluation of
our US-dollar net monetary assets. This compares to losses of $6.9 million and
$7.2 million during the same periods in the prior year.

Income taxes

The effective consolidated income tax rates for the three and six months
ended June 30, 2008 were 30.6 per cent and 29.8 per cent, respectively, as
compared to 29.8 per cent and 34.1 per cent for the same periods in 2007. The
variances from 2007 are attributable to federal corporate income tax rate
reductions enacted in June and December 2007 and a reduced British Columbia
corporate income tax rate enacted in the first quarter of 2008.

Guest experience

Our focus on guests is one of the most important elements in our
continued growth strategy. We are committed to achieving strong operational
results in order to enhance guest experience. At the same time, positive guest
experience begins with safety, one of our core values. As we look for ways to
deliver exceptional guest service, the safety of our guests and crew is
uncompromised.

Key Performance Indicators

<<
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
-------------------------------------------------------------------------
2008 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
On-time performance
(A15) 84.3% 88.5% (4.2 pts) 77.2% 82.3% (5.1 pts)
Completion rate 99.0% 99.4% (0.4 pts) 98.6% 98.9% (0.3 pts)
Bag ratio 3.32 3.47 (4.3%) 4.23 4.37 (3.2%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

Key performance indicators are calculated based on the U.S. Department of
Transportation's standards of measurement for the U.S. airline industry.
On-time performance is a key factor in measuring our guest experience.
During the second quarter of 2008, we continued to experience more severe
weather patterns which impacted our on-time performance when compared to the
same period of 2007. Similarly, for the first half of 2008, harsh winter
weather, particularly during the first quarter, contributed to the decline in
on-time performance. In the second quarter of 2008, 84.3 per cent of all our
flights arrived within 15 minutes of their scheduled time, compared to 88.5
per cent for the same period in 2007.
Our completion rates remained relatively flat for the three and six
months ended June 30, 2008 at 99.0 per cent and 98.6 per cent versus 99.4 per
cent and 98.9 per cent, respectively, in the same periods of 2007. This
indicator represents the percentage of flights completed from flights
originally scheduled.
We continued to see improvements in our bag ratios for the second quarter
and first half of 2008 of 3.32 and 4.23, respectively. This ratio represents
the number of delayed or lost baggage claims made per 1,000 guests. These were
improvements of 4.3 per cent and 3.2 per cent for the three and six month
periods ended June 30, 2008, respectively, over the same periods of 2007.

LIQUIDITY AND CAPITAL RESOURCES

Our financial strength is demonstrated by our healthy balance sheet,
ability to generate positive cash flows, substantial cash balance, the
repurchase of 2.0 million shares and positive leverage ratios. Despite record
fuel prices, we remain profitable, and our balance sheet has remained one of
the strongest in the airline industry.
As at June 30, 2008, total cash and cash equivalents were $812.0 million
compared to $653.6 million at December 31, 2007. Part of this cash balance
relates to cash collected with respect to advance ticket sales for which the
balance at June 30, 2008 was $323.4 million as compared to $194.9 million at
December 31, 2007. Our working capital ratio of 1.20 compared to 1.22 as at
December 31, 2007 indicates healthy liquidity and a favourable financial
position. As at, and for the three and six months ended June 30, 2008, we did
not have any investments in asset-backed commercial paper.
We monitor capital on a number of measures, including adjusted
debt-to-equity and adjusted net debt to EBITDAR. As at June 30, 2008, our
adjusted debt-to-equity ratio was 1.95 to 1.00, including $580.7 million in
off-balance-sheet aircraft operating leases. This is an improvement of 5.8 per
cent from 2.07 to 1.00 at December 31, 2007, attributable to the increase in
net earnings more than offsetting the addition of new aircraft financing
during the first half of 2008. As at June 30, 2008, our adjusted net debt to
EBITDAR ratio was 2.15 as compared to 2.51 as at December 31, 2007, an
improvement of 14.3 per cent. This change resulted from increased EBITDAR and
cash and cash equivalents. Both of these ratios met our targets for June 30,
2008 and December 31, 2007 of an adjusted debt-to-equity measure and an
adjusted net debt to EBITDAR ratio of no more than 3.00.
To see the Adjusted Net Debt to EBITDAR chart, click here:
http://media3.marketwire.com/docs/728wja_ebitdar.pdf.

<<
(i) The trailing twelve months are used in the calculation of EBITDAR.
See "Reconciliation of Non-GAAP Measures to GAAP" at the end of this
MD&A for further information.
>>

Operating cash flow

Despite the soaring prices of jet fuel, we continued to generate positive
cash flow from operations. During the second quarter of 2008, our operating
cash flow was $125.9 million compared to $148.9 million in the same period of
2007, a decrease of 15.4 per cent. This decline was primarily due to higher
fuel expenses. For the first half of 2008, operating cash flow increased by
7.6 per cent to $315.7 million from $293.5 million in the first half of 2007,
due to growth in our earnings and improved working capital.

Financing cash flow

For the second quarter of 2008, our total cash flow used in financing
activities was $71.8 million, attributable largely to $41.5 million in
long-term debt repayments related to our aircraft and $29.4 million for shares
repurchased under our normal course issuer bid. Similarly, the $50.4 million
cash flow used in financing activities during the second quarter of 2007
related primarily to $37.0 million in long-term debt repayments and $11.8
million towards share repurchases. During the first half of 2008, our cash
flow used in financing activities was comprised primarily of $82.9 million in
long-term debt repayments largely relating to our aircraft, the consideration
of $29.4 million to repurchase shares and $2.7 million in deposits mainly
related to future leased aircraft. The outflows were partially offset by the
issuance of $67.9 million in long-term debt to finance two owned aircraft. In
the comparable period of 2007, our financing cash flow was used towards $80.1
million in long-term debt repayments, $11.8 million in consideration under our
previous normal course issuer bid and $9.3 million in deposits relating mainly
to future leased aircraft.
In addition to having strong cash liquidity, we have been successful in
financing our growth through aircraft acquisitions financed by
low-interest-rate debt supported by the Export-Import Bank of the United
States (Ex-Im Bank). On July 17, 2008, we took delivery of one owned aircraft
supported by US $33.7 million in debt guaranteed by Ex-Im Bank.
These loan guarantees from the U.S. government represent approximately 85
per cent of the purchase price of these aircraft. This financing activity
brings the cumulative number of aircraft financed with loan guarantees to 52,
with an outstanding debt balance of $1.4 billion associated with those
aircraft. All of this debt has been financed in Canadian dollars at fixed
interest rates, thus eliminating all future foreign exchange and interest rate
exposure on these US-dollar aircraft purchases.
To facilitate the financing of our Ex-Im Bank supported aircraft, we
utilize five special-purpose entities. We have no equity ownership in the
special-purpose entities; however, we are the beneficiary of the
special-purpose entities' operations. The accounts of the special-purpose
entities have been consolidated in the financial statements.

Investing cash flow

Cash used in investing activities for the second quarter and first six
months of 2008 was $26.6 million and $110.0 million, respectively, compared to
$18.3 million and $19.2 million in the comparable periods of 2007. During the
second quarter of 2008, the majority of our investing activities included
$14.8 million in expenditures relating to the construction of our new office
space, the Calgary "Campus", and deposits made to Boeing for four future
aircraft commitments signed in the second quarter. For the comparable period
in 2007, investing activities related primarily to similar Boeing deposits.
For the first half of 2008, our investing activities related to the addition
of two new owned aircraft totalling $71.3 million, as well as $28.7 million in
expenditures relating to Campus construction. We paid deposits towards owned
aircraft deliveries during the first half of 2007, partially offset by $13.8
million in proceeds received on the sale of two engines.

Capital resources

On June 18, 2008, we signed an agreement to purchase four Boeing 737-700
aircraft, with two scheduled for delivery in 2010 and two in 2011, bringing
our total committed fleet to 120 by 2013. On February 29, 2008, we signed a
Letter of Intent to lease an additional 737-800 aircraft scheduled for
delivery in 2011. This has not been reflected as a commitment in the table
below as the lease agreement has not yet been signed; however, if included,
our future deliveries would be 121 aircraft by 2013. During the second quarter
of 2008, we assumed delivery of two leased 737-700 aircraft, bringing the
total number of deliveries to five aircraft for the first half of 2008.
As at June 30, 2008, we had existing firm commitments to take delivery of
an additional 45 aircraft as summarized below:

<<
At June 30, 2008
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Series
------------------------------------
600s 700s
------------------------------------
Leased Owned Total Leased Owned Total
-------------------------------------------------------------------------
Fleet at December 31, 2007 - 13 13 16 35 51
-------------------------------------------------------------------------
Fleet at June 30, 2008 - 13 13 18 37 55
Commitments:
2008 - - - - 1 1
2009 - - - 7 - 7
2010 - - - 4 2(1) 6
2011 - - - 4 2(1) 6
2012 - - - - 14(1) 14
2013 - - - - 6(1) 6
-------------------------------------------------------------------------
Total Commitments - - - 15 25 40
-------------------------------------------------------------------------
Committed fleet as of 2013 - 13 13 33 62 95
-------------------------------------------------------------------------
(1) We have an option to convert any of these future aircraft to
737-800s.
-------------------------------------------------------------------------
-------------------------------------------------------------------------

At June 30, 2008
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Series
------------------------------------
800s Total Fleet
------------------------------------
Leased Owned Total Leased Owned Total
-------------------------------------------------------------------------
Fleet at December 31, 2007 5 1 6 21 49 70
-------------------------------------------------------------------------
Fleet at June 30, 2008 6 1 7 24 51 75
Commitments:
2008 1 - 1 1 1 2
2009 3 - 3 10 - 10
2010 1 - 1 5 2 7
2011 - - - 4 2 6
2012 - - - - 14 14
2013 - - - - 6 6
-------------------------------------------------------------------------
Total Commitments 5 - 5 20 25 45
-------------------------------------------------------------------------
Committed fleet as of 2013 11 1 12 44 76 120
-------------------------------------------------------------------------
(1) We have an option to convert any of these future aircraft to
737-800s.
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

As at June 30, 2008, our total purchased aircraft commitment, including
amounts to be paid for live satellite television systems on purchased and
leased aircraft, was $1,098.4 million, or US $1,077.2 million. Additionally,
our commitment relating to aircraft operating leases was $1,431.4 million, or
US $1,403.8 million as at June 30, 2008.
Significant progress was made in the construction of our Campus adjacent
to the Calgary hangar during the second quarter of 2008. Financed through our
operating cash flow, we incurred $14.8 million in Campus-related expenditures
during the second quarter of 2008. For the six months ended June 30, 2008, we
spent $28.7 million with respect to the Campus, for a total spend of
$40.6 million as at June 30, 2008. Our budget for the Campus construction is
approximately $100 million. Occupancy remains on track for the first quarter
of 2009.
The Campus is being constructed in accordance with certification
guidelines from the Leadership in Energy and Environmental Design (LEED)
system. LEED rates the design, construction and operations of high-performance
green buildings. We aim to be an environmentally responsible company and
construct a building that will be cost-efficient to operate. With respect to
the Campus, we intend to achieve a Gold certification from LEED, which
requires strict documentation and standards in order to be awarded that level
of rating.

Contractual obligations, off-balance-sheet arrangements and commitments

We currently have 24 aircraft under operating leases. We have entered
into agreements with independent third parties to lease 15 additional 737-700
aircraft and five 737-800 aircraft over eight- and 10-year terms in US
dollars, to be delivered throughout 2008 to 2011. Although the current
obligations related to our aircraft operating lease agreements are not
recognized on our balance sheet, we include these commitments in assessing our
leverage through our adjusted debt-to-equity and net debt to EBITDAR ratios.

Contingencies

We are party to certain legal proceedings and claims that arise during
the ordinary course of business. It is the opinion of management that the
ultimate outcome of these matters will not have a material effect upon our
financial position, results of operations or cash flows.

Normal course issuer bid

On March 12, 2008, we filed a notice with the Toronto Stock Exchange
(TSX) to make a normal course issuer bid to purchase outstanding shares on the
open market. As approved by the TSX, we are authorized to purchase up to
2,500,000 shares (representing approximately 1.9 per cent of our issued and
outstanding shares at the time of the bid) during the period of March 17, 2008
to March 16, 2009, or until such earlier time as the bid is completed or
terminated at our option. Any shares we purchase under this bid will be
purchased on the open market through the facilities of the TSX at the
prevailing market price at the time of the transaction. Shares acquired under
this bid will be cancelled. During the three and six month periods ended
June 30, 2008, we purchased 2,005,084 shares under the bid for total
consideration of $29.4 million. The average book value for the shares
repurchased of $7.1 million was charged to share capital with the $22.3
million excess of the market price over the average book value charged to
retained earnings.

Share capital

As at July 25, 2008, the number of common voting shares and variable
voting shares amounted to 121,927,570 and 5,966,617, respectively.

Related party transactions

We have debt financing and investments in short-term deposits with a
financial institution which is related through two common directors, one of
whom is also the president of the financial institution. As at June 30, 2008,
total long-term debt includes an amount of $21.8 million (December 31, 2007 -
$23.3 million) due to the financial institution. Included in cash and cash
equivalents as at June 30, 2008 are short-term investments of $234.1 million
(December 31, 2007 - $189.4 million) owing from the financial institution.
These transactions occurred in the normal course of operations with terms
consistent with those offered to arm's length parties and are measured at the
exchange amount.

ACCOUNTING

Changes in accounting policies

Effective January 1, 2008, we adopted CICA Section 3031, Inventories,
which replaces Section 3030, Inventories, and harmonizes the Canadian
standards related to inventories with International Financial Reporting
Standards (IFRS). This section provides more extensive guidance on the
determination of cost, narrows the permitted cost formulas, requires
impairment testing and expands the disclosure requirements to increase
transparency. There was no impact on our financial results from the adoption
of Section 3031.
Effective January 1, 2008, we adopted CICA Section 1535, Capital
Disclosures, which establishes guidelines for the disclosure of information on
an entity's capital and how it is managed. This enhanced disclosure enables
users to evaluate the entity's objectives, policies and processes for managing
capital. This new requirement is for disclosure purposes only and upon
adoption did not impact our financial results for the three and six months
ended June 30, 2008. See note 3 to the consolidated financial statements for
further disclosure.
Effective January 1, 2008, we adopted CICA Section 3862, Financial
Instruments - Disclosure, and Section 3863, Financial Instruments -
Presentation, which replace the existing Section 3861, Financial Instruments -
Disclosure and Presentation. Section 3862 requires enhanced disclosure on the
nature and extent of financial instrument risks and how an entity manages
those risks. Section 3863 carries forward the existing presentation
requirements and provides additional guidance for the classification of
financial instruments. This new requirement is for disclosure purposes only
and upon adoption did not impact our financial results for the three months
and six months ended June 30, 2008. See note 10 to the consolidated financial
statements for further disclosure.

Future accounting policy changes

In February 2008, the CICA Accounting Standards Board (AcSB) confirmed
the changeover to IFRS from Canadian GAAP will be required for publicly
accountable enterprises for interim and annual financial statements effective
for fiscal years beginning on or after January 1, 2011. The AcSB issued the
"omnibus" exposure draft of IFRS with comments due by July 31, 2008, wherein
early adoption by Canadian entities is also permitted. The Canadian Securities
Administrators (CSA) has also issued Concept Paper 52-402, which requested
feedback on the early adoption of IFRS. The eventual changeover to IFRS
represents changes due to new accounting standards. The transition from
current Canadian GAAP to IFRS is a significant undertaking that may materially
affect our reported financial position and results of operations.
Although we have not completed development of our IFRS changeover plan,
when finalized, it will address project structure and governance, resourcing
and training, analysis of key GAAP differences and a phased plan to assess
accounting policies under IFRS, as well as potential IFRS 1 exemptions. We
anticipate completing our project scoping, which will include a timetable for
assessing the impact on data systems, internal controls over financial
reporting and business activities, such as financing and compensation
arrangements, in the fourth quarter of 2008.

CONTROLS AND PROCEDURES

Management is responsible for the establishment and maintenance of a
system of disclosure controls and procedures. The Chief Executive Officer
(CEO) and the Chief Financial Officer (CFO) have evaluated the effectiveness
of our disclosure controls and procedures (DC&P) as of June 30, 2008, as
defined under the rules of the CSA, and have concluded that our disclosure
controls and procedures are effective. Management is also responsible for the
establishment and maintenance of a system of internal controls over financial
reporting (ICFR). Management has designed internal controls over financial
reporting effectively to provide reasonable assurance regarding the
reliability of our financial reporting and the preparation of financial
statements in accordance with Canadian GAAP. There were no changes in our
internal controls over financial reporting during the most recent interim
period that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.

Changes in CSA requirements over certification of disclosure

On April 18, 2008, the CSA released a revised proposal to repeal and
replace Multilateral Instrument 52-109 with a revised version of National
Instrument 52-109.
Based on this new proposal, there is a requirement to evaluate the
operating effectiveness of ICFR in addition to design effectiveness.
Furthermore, the CEO and CFO will have a requirement to certify over the
design and operating effectiveness of DC&P and ICFR for the year ended
December 31, 2008. We expect the proposal to be finalized by the CSA and
become effective in the third quarter of 2008 and have therefore incorporated
the revisions into the current annual certification process.

OUTLOOK

During the second quarter of 2008, the soaring cost of fuel affected our
margins. Despite these pressures negatively impacting the airline industry,
our quarterly profit margins are expected to be near the top of the industry.
Our dedicated WestJetters help set us apart from our competition, and our
low-cost, high-efficiency business model continues to shine in even the most
difficult economic environments. During these challenges, our WestJet brand
has remained strong with a focus on high-value service to our guests. We will
continue to execute and carry out our strategic plan.
At current unprecedented and elevated levels, fuel prices will negatively
impact our margins during the remainder of 2008. Economic uncertainty in North
America, as well as the higher cost of air travel due to record fuel prices,
is deterring some guests from travelling. Despite these challenges, we are
positioned well within the North American airline industry to endure the high
cost of jet fuel and potential economic downturn.
In the third quarter of 2008, our total fleet will increase to 76 as we
take delivery of one additional purchased aircraft. During the same period, we
expect our capacity to increase by 18 per cent as compared to the third
quarter of 2007. We expect our third quarter RASM levels to be comparable to
that of the third quarter of 2007. Based on jet fuel pricing at the end of
July 2008, we expect our fuel cost per litre to be approximately $1.12, net of
fuel hedges. This represents an increase of approximately 60 per cent from the
same quarter of 2007. Of our total operating costs, we expect fuel to comprise
approximately 40 per cent, an increase of approximately 10 percentage points
from the third quarter of 2007.
For 2008, we estimate the sensitivity to changes in crude oil and fuel
pricing to be approximately $5 million annually to our fuel costs for every
US-dollar change per barrel of crude oil and $9 million for every one-cent
change per litre of fuel. We also estimate that every one-cent change in the
value of the Canadian dollar versus the US dollar will have an approximate $10
million impact on our annual costs (approximately $8 million for fuel and $2
million related to other US-dollar denominated expenses).

NON-GAAP MEASURES

To supplement our consolidated financial statements presented in
accordance with Canadian GAAP, we use various non-GAAP performance measures.
These measures are provided to enhance the user's overall understanding of our
current financial performance and are included to provide investors and
management with an alternative method for assessing our operating results in a
manner that is focused on the performance of our ongoing operations and to
provide a more consistent basis for comparison between quarters. These
measures are not in accordance with or an alternative for GAAP and may be
different from measures used by other entities.

The following non-GAAP measures are used to monitor our financial
performance:

Adjusted debt: Long-term debt and obligations under capital lease include
off-balance-sheet aircraft operating leases. Our practice, consistent with
common industry practice, is to multiply the trailing twelve months of
aircraft leasing expense by 7.5 to derive a present value debt equivalent.

Adjusted equity: The sum of share capital, contributed surplus and
retained earnings, excluding accumulated other comprehensive loss.

Adjusted net debt: Adjusted debt less cash and cash equivalents.

Earnings before tax margin: Earnings before income taxes divided by total
revenues.

EBITDAR: Earnings Before Interest, Taxes, Depreciation, Aircraft Rent and
other items, such as asset impairments and foreign exchange gains or losses.
EBITDAR is a non-GAAP measure commonly used in the airline industry to
evaluate results by excluding differences in the method in which an airline
finances its aircraft.

Operating margin: Earnings from operations divided by total revenues.

Operating revenues: The total of guest revenues and charter and other
revenues.

<<
Reconciliation of non-GAAP measures to GAAP
-------------------------------------------------------------------------
-------------------------------------------------------------------------

-------------------------------------------------------------------------
($ in thousands, except ratio June 30, December 31,
amounts) 2008 2007 Change
-------------------------------------------------------------------------

Adjusted debt-to-equity:
Long-term debt (i) $ 1,414,583 $ 1,429,518 $ (14,935)
Obligations under capital
lease(ii) 1,298 1,483 (185)
Off-balance-sheet aircraft
leases(iii) 580,740 564,008 16,732
-------------------------------------------------------------------------
Adjusted debt $ 1,996,621 $ 1,995,009 $ 1,612
-------------------------------------------------------------------------
Total shareholders' equity 1,012,446 949,908 62,538
Add: accumulated other
comprehensive loss (AOCL) 11,001 11,914 (913)
-------------------------------------------------------------------------
Adjusted equity $ 1,023,447 $ 961,822 $ 61,625
-------------------------------------------------------------------------
Adjusted debt-to-equity 1.95 2.07 (5.8%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted net debt to EBITDAR: (iv)
Net earnings $ 234,128 $ 192,833 $ 41,295
Add:
Net interest (v) 48,838 51,448 (2,610)
Taxes 57,563 43,925 13,638
Depreciation and amortization 131,848 127,223 4,625
Aircraft leasing 77,432 75,201 2,231
Other (vi) 1,519 44,631 (43,112)
-------------------------------------------------------------------------
EBITDAR $ 551,328 $ 535,261 $ 16,067
-------------------------------------------------------------------------
Adjusted debt (as per above) 1,996,621 1,995,009 1,612
Less: Cash and cash equivalents 811,990 653,558 158,432
-------------------------------------------------------------------------
Adjusted net debt $ 1,184,631 $ 1,341,451 ($156,820)
-------------------------------------------------------------------------
Adjusted net debt to EBITDAR 2.15 2.51 (14.3%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(i) At June 30, 2008, long-term debt includes the current portion of
long-term debt of $177,449 (December 31, 2007 - $172,992) and
long-term debt of $1,237,134 (December 31, 2007 - $1,256,526).
(ii) At June 30, 2008, obligations under capital lease includes the
current portion of obligations under capital lease of $385
(December 31, 2007 - $375) and obligations under capital lease of
$913 (December 31, 2007 - $1,108).
(iii) Off-balance-sheet aircraft leases is calculated by multiplying the
trailing twelve months of aircraft leasing expense by 7.5. At
June 30, 2008, the trailing twelve months of aircraft leasing
costs totalled $77,432 (December 31, 2007 - $75,201).
(iv) The trailing twelve months are used in the calculation of EBITDAR.
(v) For the twelve months ended June 30, 2008, net interest includes
interest income of $28,402 (December 31, 2007 - $24,301) and
interest expense of $77,240 (December 31, 2007 - $75,749).
(vi) For the twelve months ended June 30, 2008, other includes foreign
exchange loss of $1,519 (December 31, 2007 - reservation system
impairment of $31,881 and foreign exchange loss of $12,750).

Consolidated Statement (Stated in thousands (Unaudited)
----------------------- ----------------------- ----------------------- Revenues:
Guest revenues Charter and other
revenues ----------------------- Expenses:
Aircraft fuel Airport operations Flight operations and
navigational charges Marketing, general and
administration Sales and distribution 40,938 Depreciation and
amortization Inflight Aircraft leasing Maintenance Employee profit share Loss on impairment of
property and
equipment ----------------------- ----------------------- Earnings from
operations of Earnings
of Canadian dollars, except per share amounts)
--------------------------------------------------
--------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
2008 2007 2008 2007
--------------------------------------------------
$ 557,305 $ 449,312 $ 1,083,005 $ 840,044
58,695 48,888 132,343 128,866
--------------------------------------------------
616,000 498,200 1,215,348 968,910
213,610 120,271 381,327 230,482
82,293 72,022 166,221 146,744
70,297 63,978 137,872 126,547
48,513 43,160 95,918 81,708
34,229 81,216 64,734
33,807 31,009 66,656 62,031
26,987 20,811 52,386 40,296
21,458 19,835 40,541 38,310
19,717 19,144 39,123 37,558
2,187 5,364 15,334 11,587
- 31,881 - 31,881
--------------------------------------------------
559,807 461,704 1,076,594 871,878
--------------------------------------------------
56,193 36,496 138,754 97,032

Non-operating income
(expense):
Interest income 6,478 5,284 13,784 9,683
Interest expense (19,148) (18,418) (38,681) (37,190)
Gain (loss) on foreign
exchange 60 (6,912) 3,997 (7,234)
Gain (loss) on
disposal of property
and equipment (63) (6) (133) 497
-------------------------------------------------------------------------
(12,673) (20,052) (21,033) (34,244)
-------------------------------------------------------------------------

Earnings before income
taxes 43,520 16,444 117,721 62,788
Income tax expense:
Current 1,162 747 2,153 1,188
Future 12,165 4,148 32,869 20,196
-------------------------------------------------------------------------
13,327 4,895 35,022 21,384
-------------------------------------------------------------------------

Net earnings $ 30,193 $ 11,549 $ 82,699 $ 41,404
-------------------------------------------------------------------------
-------------------------------------------------------------------------

-------------------------------------------------------------------------
Earnings per share:
Basic $ 0.23 $ 0.09 $ 0.64 $ 0.32
Diluted $ 0.23 $ 0.09 $ 0.63 $ 0.32
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The accompanying notes are an integral part of the consolidated
financial statements.

Consolidated Balance Sheet
(Stated in thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
June 30, December 31,
2008 2007
-------------------------------------------------------------------------

Assets
Current assets:
Cash and cash equivalents (note 4) $ 811,990 $ 653,558
Accounts receivable 21,450 15,009
Prepaid expenses, deposits and other 44,904 39,019
Inventory 26,973 10,202
-------------------------------------------------------------------------
905,317 717,788

Property and equipment (note 5 2,255,488 2,213,063

Other assets 58,348 53,371
-------------------------------------------------------------------------
$ 3,219,153 $ 2,984,222
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 192,958 $ 168,171
Advance ticket sales 323,372 194,929
Non-refundable guest credits 58,004 54,139
Current portion of long-term debt (note 6) 177,449 172,992
Current portion of obligations under
capital lease 385 375
-------------------------------------------------------------------------
752,168 590,606

Long-term debt (note 6) 1,237,134 1,256,526

Obligations under capital lease 913 1,108

Other liabilities 8,744 11,337
Future income tax 207,748 174,737
-------------------------------------------------------------------------
2,206,707 2,034,314
Shareholders' equity:
Share capital (note 7) 452,318 448,568
Contributed surplus 55,394 57,889
Accumulated other comprehensive loss (11,001) (11,914)
Retained earnings 515,735 455,365
-------------------------------------------------------------------------
1,012,446 949,908

Commitments and contingencies (note 9)
-------------------------------------------------------------------------
$ 3,219,153 $ 2,984,222
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated
financial statements.

Consolidated Statement of Shareholders' Equity
(Stated in thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
2008 2007 2008 2007
-------------------------------------------------------------------------

Share capital:
Balance, beginning
of period $ 453,192 $ 435,016 $ 448,568 $ 431,248
Issuance of shares
pursuant to stock
option plans
(note 7) 227 1,343 227 1,467
Stock-based
compensation on
stock options
exercised (note 7) 5,990 5,232 10,614 8,876
Shares repurchased
(note 7) (7,091) (2,503) (7,091) (2,503)
-------------------------------------------------------------------------
452,318 439,088 452,318 439,088
Contributed surplus:
Balance, beginning
of period 57,788 60,462 57,889 58,656
Stock-based
compensation
expense (note 7) 3,596 5,351 8,119 10,801
Stock-based
compensation on
stock options
exercised (note 7) (5,990) (5,232) (10,614) (8,876)
-------------------------------------------------------------------------
55,394 60,581 55,394 60,581

Accumulated other
comprehensive loss:
Balance, beginning
of period (11,200) (13,070) (11,914) -
Change in accounting
policy - - - (13,420)
Other comprehensive
income 199 350 913 700
-------------------------------------------------------------------------
(11,001) (12,720) (11,001) (12,720)

Retained earnings:
Balance, beginning
of period 507,871 309,366 455,365 316,123
Change in accounting
policy - - - (36,612)
Shares repurchased
(note 7) (22,329) (9,303) (22,329) (9,303)
Net earnings 30,193 11,549 82,699 41,404
-------------------------------------------------------------------------
515,735 311,612 515,735 311,612

Total accumulated
other comprehensive
loss and retained
earnings 504,734 298,892 504,734 298,892
-------------------------------------------------------------------------
Total shareholders'
equity $ 1,012,446 $ 798,561 $ 1,012,446 $ 798,561
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.

Consolidated Statement of Comprehensive Income
(Stated in thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
2008 2007 2008 2007
-------------------------------------------------------------------------

Net earnings $ 30,193 $ 11,549 $ 82,699 $ 41,404
Other comprehensive
income, net of tax:
Amortization of
hedge settlements
to aircraft
leasing 350 350 700 700
Unrealized change in
fair value on cash
flow hedges (net of
tax of $(21); $280) (48) - 544 -
Reclassification of net
realized gains on
cash flow hedges to
net earnings (net of
tax of $(45); $(138)) (103) - (331) -
-------------------------------------------------------------------------

199 350 913 700
-------------------------------------------------------------------------
Total comprehensive
income $ 30,392 $ 11,899 $ 83,612 $ 42,104
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated
financial statements.

Consolidated Statement of Cash Flows
(Stated in thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
2008 2007 2008 2007
-------------------------------------------------------------------------

Operating activities
Net earnings $ 30,193 $ 11,549 $ 82,699 $ 41,404
Items not involving
cash:
Depreciation and
amortization 33,807 31,009 66,656 62,031
Amortization of
other liabilities (234) (217) (469) (434)
Amortization of
hedge settlements 350 350 700 700
Loss on disposal of
property, equipment
and aircraft parts 210 32,001 1,087 31,581
Stock-based
compensation expense 3,395 5,730 7,916 11,180
Future income tax
expense 12,165 4,148 32,869 20,196
Unrealized foreign
exchange loss (gain) 98 7,764 (4,203) 8,064
Change in non-cash
working capital 45,938 56,571 128,468 118,812
-------------------------------------------------------------------------
125,922 148,905 315,723 293,534
-------------------------------------------------------------------------

Financing activities
Increase in
long-term debt - - 67,948 -
Repayment of
long-term debt (41,455) (37,046) (82,883) (80,104)
Decrease in
obligations under
capital lease (93) (88) (185) (176)
Increase in other
assets (593) (133) (2,665) (9,264)
Shares repurchased (29,420) (11,806) (29,420) (11,806)
Issuance of common
shares 227 1,343 227 1,467
Change in non-cash
working capital (491) (2,627) (2,206) (2,627)
-------------------------------------------------------------------------
(71,825) (50,357) (49,184) (102,510)
-------------------------------------------------------------------------

Investing activities
Aircraft additions (6,492) (9,946) (73,956) (22,174)
Other property and
equipment additions (20,070) (8,347) (36,207) (10,772)
Other property and
equipment disposals 10 21 165 13,781
-------------------------------------------------------------------------
(26,552) (18,272) (109,998) (19,165)
-------------------------------------------------------------------------

Cash flow from
operating, financing
and investing
activities 27,545 80,276 156,541 171,859
Effect of exchange
rate on cash and
cash equivalents 93 (3,344) 1,891 (3,400)
-------------------------------------------------------------------------
Net change in cash
and cash equivalents 27,638 76,932 158,432 168,459
Cash and cash
equivalents, beginning
of period 784,352 469,044 653,558 377,517
-------------------------------------------------------------------------
Cash and cash
equivalents, end of
period $ 811,990 $ 545,976 $ 811,990 $ 545,976
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash interest paid $ (19,340) $ (18,462) $ (38,973) $ (37,798)
Cash taxes received
(paid) $ (594) $ 1,269 $ (1,362) $ 11,089
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.

Notes to Consolidated Financial Statements

(Stated in thousands of Canadian dollars, except share and per share
data)

(Unaudited)

1. Basis of presentation

The interim consolidated financial statements of WestJet Airlines Ltd.
(WestJet or the Corporation) have been prepared by management in
accordance with Canadian generally accepted accounting principles
(GAAP). The interim consolidated financial statements have been prepared
following the same accounting policies and methods of computation as the
consolidated financial statements for the year ended December 31, 2007,
except as described below. The disclosures provided below are
incremental to those included with the annual consolidated financial
statements. The interim consolidated financial statements should be read
in conjunction with the consolidated financial statements and the notes
thereto in the Corporation's Annual Report for the year ended
December 31, 2007.

The Corporation's business is seasonal in nature with varying levels of
activity throughout the year. The Corporation experiences increased
domestic travel in the summer months and more demand for transborder and
sun destinations over the winter period.

Amounts presented in the Corporation's interim consolidated financial
statements and the notes thereto are in Canadian dollars unless otherwise
stated.

Certain prior-period balances have been reclassified to conform to
current period's presentation, including the reclassification of interest
income and interest expense as non-operating items and the
reclassification of the Corporation's employee profit share expense as
operating items.

2. Recent accounting pronouncements

(a) Change in accounting policies

Effective January 1, 2008, the Corporation adopted the following new
accounting standards issued by the Canadian Institute of Chartered
Accountants (CICA):

(i) Inventory

CICA Section 3031, Inventories, replaces Section 3030, Inventories, and
harmonizes the Canadian standards related to inventories with
International Financial Reporting Standards (IFRS). This section provides
more extensive guidance on the determination of cost, narrows the
permitted cost formulas, requires impairment testing and expands the
disclosure requirements to increase transparency. There was no impact on
the financial results of the Corporation from the adoption of
Section 3031.

(ii) Capital disclosures

CICA Section 1535, Capital Disclosures, establishes guidelines for the
disclosure of information on an entity's capital and how it is managed.
This enhanced disclosure enables users to evaluate the entity's
objectives, policies and processes for managing capital. This new
requirement is for disclosure purposes only and upon adoption did not
impact the financial results of the Corporation. See note 3, capital
management, for further disclosure.

(iii) Financial instruments - disclosure and presentation

CICA Section 3862, Financial Instruments - Disclosure, and Section 3863,
Financial Instruments - Presentation, replace the existing Section 3861,
Financial Instruments - Disclosure and Presentation. Section 3862
requires enhanced disclosure on the nature and extent of financial
instrument risks and how an entity manages those risks. Section 3863
carries forward the existing presentation requirements and provides
additional guidance for the classification of financial instruments. This
new requirement is for disclosure purposes only and upon adoption did not
impact the financial results of the Corporation. See note 10, financial
instruments and risk management, for further disclosure.

(b) Future accounting policies

International Financial Reporting Standards

In February 2008, the CICA Accounting Standards Board (AcSB) confirmed
the changeover to IFRS from Canadian GAAP will be required for publicly
accountable enterprises for interim and annual financial statements
effective for fiscal years beginning on or after January 1, 2011. The
AcSB issued the "omnibus" exposure draft of IFRS with comments due by
July 31, 2008, wherein early adoption by Canadian entities is also
permitted. The Canadian Securities Administrators has also issued Concept
Paper 52-402, which requested feedback on the early adoption of IFRS. The
eventual changeover to IFRS represents changes due to new accounting
standards. The transition from current Canadian GAAP to IFRS is a
significant undertaking that may materially affect the Corporation's
reported financial position and results of operations.

Although the Corporation has not completed development of its IFRS
changeover plan, when finalized, it will address project structure and
governance, resourcing and training, analysis of key GAAP differences and
a phased plan to assess accounting policies under IFRS, as well as
potential IFRS 1 exemptions. The Corporation anticipates completing its
project scoping, which will include a timetable for assessing the impact
on data systems, internal controls over financial reporting and business
activities, such as financing and compensation arrangements, in the
fourth quarter of 2008.

3. Capital management

The Corporation's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain future
development of the airline. The Corporation manages its capital structure
and makes adjustments to it in light of changes in economic conditions
and the risk characteristics of the underlying assets.

In order to maintain or adjust the capital structure, the Corporation may
from time to time purchase shares for cancellation pursuant to normal
course issuer bids to offset dilution, issue new shares and adjust
current and projected debt levels.

In the management of capital, the Corporation includes shareholders'
equity (excluding accumulated other comprehensive loss), long-term debt,
capital leases, cash and cash equivalents and the Corporation's off-
balance-sheet obligations related to its aircraft operating leases.

The Corporation monitors capital on a number of bases, including adjusted
debt-to-equity and adjusted net debt to Earnings Before Interest, Taxes,
Depreciation and Aircraft Rent (EBITDAR). EBITDAR is a non-GAAP financial
measure commonly used in the airline industry to evaluate results by
excluding differences in the method by which an airline finances its
aircraft. In addition, the Corporation will adjust EBITDAR for one-time
special items and for gains and losses on foreign exchange. The
Corporation adjusts debt to include its off-balance-sheet aircraft
operating leases. Common industry practice is to multiply the trailing
twelve months of aircraft leasing expense by 7.5 to derive a present
value debt equivalent. The Corporation defines adjusted net debt as
adjusted debt less cash and cash equivalents. The Corporation defines
equity as the sum of share capital, contributed surplus and retained
earnings and excludes accumulated other comprehensive loss (AOCL).

-------------------------------------------------------------------------
-------------------------------------------------------------------------
June 30, December 31,
2008 2007 Change
-------------------------------------------------------------------------

Adjusted debt-to-equity:
Long-term debt(i) $ 1,414,583 $ 1,429,518 $ (14,935)
Obligations under capital
lease(ii) 1,298 1,483 (185)
Off-balance-sheet aircraft
leases(iii) 580,740 564,008 16,732
-------------------------------------------------------------------------
Adjusted debt $ 1,996,621 $ 1,995,009 $ 1,612
-------------------------------------------------------------------------
Total shareholders' equity 1,012,446 949,908 62,538
Add: AOCL 11,001 11,914 (913)
-------------------------------------------------------------------------
Adjusted equity $ 1,023,447 $ 961,822 $ 61,625
-------------------------------------------------------------------------
Adjusted debt-to-equity 1.95 2.07 (5.8%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Adjusted net debt to EBITDAR(iv):
Net earnings $ 234,128 $ 192,833 $ 41,295
Add:
Net interest(v) 48,838 51,448 (2,610)
Taxes 57,563 43,925 13,638
Depreciation and amortization 131,848 127,223 4,625
Aircraft leasing 77,432 75,201 2,231
Other(vi) 1,519 44,631 (43,112)
-------------------------------------------------------------------------
EBITDAR $ 551,328 $ 535,261 $ 16,067
-------------------------------------------------------------------------

Adjusted debt (as per above) $ 1,996,621 1,995,009 1,612
Less: Cash and cash equivalents 811,990 653,558 158,432
-------------------------------------------------------------------------
Adjusted net debt $ 1,184,631 $ 1,341,451 $ (156,820)
-------------------------------------------------------------------------
Adjusted net debt to EBITDAR 2.15 2.51 (14.3%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(i) At June 30, 2008, long-term debt includes the current portion of
long-term debt of $177,449 (December 31, 2007 - $172,992) and
long-term debt of $1,237,134 (December 31, 2007 - $1,256,526).
(ii) At June 30, 2008, obligations under capital lease includes the
current portion of obligations under capital lease of $385
(December 31, 2007 - $375) and obligations under capital lease of
$913 (December 31, 2007 - $1,108).
(iii) Off-balance-sheet aircraft leases is calculated by multiplying the
trailing twelve months of aircraft leasing expense by 7.5. At
June 30, 2008, the trailing twelve months of aircraft leasing
costs totalled $77,432 (December 31, 2007 - $75,201).
(iv) The trailing twelve months are used in the calculation of EBITDAR.
(v) For the twelve months ended June 30, 2008, net interest includes
interest income of $28,402 (December 31, 2007 - $24,301) and
interest expense of $77,240 (December 31, 2007 - $75,749).
(vi) For the twelve months ended June 30, 2008, other includes foreign
exchange loss of $1,519 (December 31, 2007 - reservation system
impairment of $31,881 and foreign exchange loss of $12,750).

For June 30, 2008 and December 31, 2007, the Corporation's targets were
an adjusted debt-to-equity measure of no more than 3.00 and an adjusted
net debt to EBITDAR of no more than 3.00. As at June 30, 2008, the
Corporation's adjusted debt-to-equity ratio improved by 5.8%,
attributable to the increase in shareholders' equity (mainly net
earnings) more than offsetting the addition of new aircraft financing in
the six months. As at June 30, 2008, the Corporation's adjusted net debt
to EBITDAR improved by 14.3% as a result of increased EBITDAR and cash
and cash equivalents.

No dividends have been paid or declared on any of the Corporation's
shares since the date of incorporation. This policy is based on
operational results, financial policy and financing requirements for
future growth and is continuously reviewed by the Corporation.

The Corporation is subject to an externally imposed capital requirement
under the provisions of the Canada Transportation Act. Under the Act, the
Corporation must, as a corporation which indirectly wholly owns the
holder of a domestic licence, a scheduled international licence and a
non-scheduled international licence, be Canadian, that is, be controlled,
in fact, by Canadians with at least 75% of its voting interest owned and
controlled by Canadians. To monitor this external requirement, the
Corporation has structured its voting shares into two classes: common
voting and variable voting. The common voting shares may be owned and
controlled by Canadians only. The variable voting shares may be owned and
controlled only by persons who are not Canadian and, as a class, cannot
exceed more than 25% of the total number of votes cast on any matter on
which a vote is to be taken. As at June 30, 2008, the Corporation is in
compliance with this requirement.

There were no changes in the Corporation's approach to capital management
during the three and six months ended June 30, 2008.

4. Cash and cash equivalents

As at June 30, 2008, cash and cash equivalents included bank balances of
$67,751 (December 31, 2007 - $37,395) and short-term investments of
$744,239 (December 31, 2007 - $616,163). Included in these balances, as
at June 30, 2008, the Corporation has US-dollar cash and cash equivalents
of US $58,933 (December 31, 2007 - US $59,843).

As at June 30, 2008, cash and cash equivalents included restricted cash
of $3,417 (December 31, 2007 -$2,069) for security on the Corporation's
facilities for letters of guarantee. In accordance with regulatory
requirements, the Corporation has US $167 (December 31, 2007 - US $295)
in restricted cash representing cash not yet remitted for passenger
facility charges.

For June 30, 2008 and December 31, 2007, the Corporation's targets were
an adjusted debt-to-equity measure of no more than 3.00 and an adjusted
net debt to EBITDAR of no more than 3.00. As at June 30, 2008, the
Corporation's adjusted debt-to-equity ratio improved by 5.8%,
attributable to the increase in shareholders' equity (mainly net
earnings) more than offsetting the addition of new aircraft financing in
the six months. As at June 30, 2008, the Corporation's adjusted net debt
to EBITDAR improved by 14.3% as a result of increased EBITDAR and cash
and cash equivalents.

No dividends have been paid or declared on any of the Corporation's
shares since the date of incorporation. This policy is based on
operational results, financial policy and financing requirements for
future growth and is continuously reviewed by the Corporation.

The Corporation is subject to an externally imposed capital requirement
under the provisions of the Canada Transportation Act. Under the Act, the
Corporation must, as a corporation which indirectly wholly owns the
holder of a domestic licence, a scheduled international licence and a
non-scheduled international licence, be Canadian, that is, be controlled,
in fact, by Canadians with at least 75% of its voting interest owned and
controlled by Canadians. To monitor this external requirement, the
Corporation has structured its voting shares into two classes: common
voting and variable voting. The common voting shares may be owned and
controlled by Canadians only. The variable voting shares may be owned and
controlled only by persons who are not Canadian and, as a class, cannot
exceed more than 25% of the total number of votes cast on any matter on
which a vote is to be taken. As at June 30, 2008, the Corporation is in
compliance with this requirement.

There were no changes in the Corporation's approach to capital management
during the three and six months ended June 30, 2008.

4. Cash and cash equivalents

As at June 30, 2008, cash and cash equivalents included bank balances of
$67,751 (December 31, 2007 - $37,395) and short-term investments of
$744,239 (December 31, 2007 - $616,163). Included in these balances, as
at June 30, 2008, the Corporation has US-dollar cash and cash equivalents
of US $58,933 (December 31, 2007 - US $59,843).

As at June 30, 2008, cash and cash equivalents included restricted cash
of $3,417 (December 31, 2007 -$2,069) for security on the Corporation's
facilities for letters of guarantee. In accordance with regulatory
requirements, the Corporation has US $167 (December 31, 2007 - US $295)
in restricted cash representing cash not yet remitted for passenger
facility charges.

5. Property and equipment

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated
June 30, 2008 Cost depreciation Net book value
-------------------------------------------------------------------------
Aircraft $ 2,359,929 $ 344,143 $ 2,015,786
Ground property and
equipment 154,293 84,096 70,197
Spare engines and parts 76,726 15,120 61,606
Buildings 40,028 6,327 33,701
Leasehold improvements 7,284 5,396 1,888
Assets under capital lease 2,481 1,440 1,041
-------------------------------------------------------------------------
2,640,741 456,522 2,184,219
Deposits on aircraft 26,072 - 26,072
Assets under development 45,197 - 45,197
-------------------------------------------------------------------------
$ 2,712,010 $ 456,522 $ 2,255,488
-------------------------------------------------------------------------
-------------------------------------------------------------------------

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated
December 31, 2007 Cost depreciation Net book value
-------------------------------------------------------------------------
Aircraft $ 2,273,509 $ 288,909 $ 1,984,600
Ground property and
equipment 158,477 81,345 77,132
Spare engines and parts 76,862 13,610 63,252
Buildings 40,028 5,825 34,203
Leasehold improvements 7,039 5,112 1,927
Assets under capital lease 2,481 1,191 1,290
-------------------------------------------------------------------------
2,558,396 395,992 2,162,404
Deposits on aircraft 38,795 - 38,795
Assets under development 11,864 - 11,864
-------------------------------------------------------------------------
$ 2,609,055 $ 395,992 $ 2,213,063
-------------------------------------------------------------------------
-------------------------------------------------------------------------

As at June 30, 2008, assets under development include $40,586 (December
31, 2007 - $11,850) in amounts capitalized in conjunction with the
Corporation's new Campus facility.

6. Long-term debt

-------------------------------------------------------------------------
-------------------------------------------------------------------------
June 30, December 31,
2008 2007
-------------------------------------------------------------------------
Term loans - purchased aircraft (i) $ 1,377,894 $ 1,389,888
Term loans - flight simulators (ii) 21,754 23,325
Term loans - live satellite
television equipment (iii) 2,680 3,621
Term loan - Calgary hangar
facility (iv) 9,853 10,054
Term loan - Calgary hangar
facility (v) 2,402 2,630
-------------------------------------------------------------------------
1,414,583 1,429,518
Current portion 177,449 172,992
-------------------------------------------------------------------------
$ 1,237,134 $ 1,256,526
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(i) 51 individual term loans, amortized on a straight-line basis over a
12-year term, each repayable in quarterly principal instalments
ranging from $668 to $955, including fixed interest at a weighted
average rate of 5.33%, maturing between 2014 and 2019. These
facilities are guaranteed by the Export-Import Bank of the United
States (Ex-Im Bank) and secured by one 800-series aircraft, 37 700-
series aircraft and 13 600-series aircraft.

(ii) Three individual term loans, repayable in monthly instalments
ranging from $104 to $168, including floating interest at the
bank's prime rate plus 0.88%, with an effective interest rate of
5.63% as at June 30, 2008, maturing in 2008 and 2011, secured by
three flight simulators.

(iii) 14 individual term loans, amortized on a straight-line basis over a
five-year term, repayable in quarterly principal instalments
ranging from $29 to $42, including floating interest at the
Canadian LIBOR rate plus 0.08%, with a weighted average effective
interest rate of 3.44% as at June 30, 2008, maturing between 2009
and 2011. These facilities are for the purchase of live satellite
television equipment and are guaranteed by the Ex-Im Bank and
secured by certain 700-series and 600-series aircraft. (iv) Term
loan repayable in monthly instalments of $108, including interest
at 9.03%, maturing April 2011, secured by the Calgary hangar
facility.

(v) Term loan repayable in monthly instalments of $50, including
floating interest at the bank's prime rate plus 0.50%, with an
effective interest rate of 5.25% as at June 30, 2008, maturing
April 2013, secured by the Calgary hangar facility.

The net book value of the property and equipment pledged as collateral
for the Corporation's secured borrowings was $2,056,311 as at June 30,
2008 (December 31, 2007 - $2,028,548).

Future scheduled repayments of long-term debt are as follows:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
2008 $ 95,800
2009 162,867
2010 162,189
2011 174,808
2012 160,460
2013 and thereafter 658,459
-------------------------------------------------------------------------
$ 1,414,583
-------------------------------------------------------------------------
-------------------------------------------------------------------------

As at June 30, 2008, the Corporation has a final commitment of
US $40.0 million from Ex-Im Bank for one 737-700 aircraft to be delivered
in July 2008. The Corporation will be charged a commitment fee of 0.125%
per annum on the unutilized and uncancelled balance of the Ex-Im Bank
facility, payable at specified dates and upon delivery of each aircraft,
and will be charged a 3% exposure fee on the financed portion of the
aircraft price, payable upon delivery of an aircraft. Upon final delivery
of the aircraft, any unused portion of the final commitment will be
cancelled.

7. Share capital

(a) Issued and outstanding

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
June 30, 2008 June 30, 2008
-------------------------------------------------------------------------
Number Amount Number Amount
-------------------------------------------------------------------------
Common and variable
voting shares:

Balance, beginning
of period 129,765,495 $ 453,192 129,571,570 $ 448,568
Issuance of shares
pursuant to stock
option plans 130,815 227 324,740 227
Stock-based compensation
expense on stock
options exercised - 5,990 - 10,614
Shares repurchased (2,005,084) (7,091) (2,005,084) (7,091)
-------------------------------------------------------------------------
Balance, end of period 127,891,226 $ 452,318 127,891,226 $ 452,318
-------------------------------------------------------------------------
-------------------------------------------------------------------------

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
June 30, 2007 June 30, 2007
-------------------------------------------------------------------------
Number Amount Number Amount
-------------------------------------------------------------------------
Common and variable
voting shares:

Balance, beginning
of period 129,902,322 $ 435,016 129,648,688 $ 431,248
Issuance of shares
pursuant to stock
option plans 493,637 1,343 747,271 1,467
Stock-based compensation
expense on stock options
exercised - 5,232 - 8,876
Shares repurchased (745,700) (2,503) (745,700) (2,503)
-------------------------------------------------------------------------
Balance, end of period 129,650,259 $ 439,088 129,650,259 $ 439,088
-------------------------------------------------------------------------
-------------------------------------------------------------------------

As at June 30, 2008, the number of common voting shares outstanding was
121,946,003 (June 30, 2007 - 125,178,225) and the number of variable
voting shares was 5,945,223 (June 30, 2007 - 4,472,034).

On March 12, 2008, WestJet filed a notice with the Toronto Stock Exchange
(TSX) to make a normal course issuer bid to purchase outstanding shares
on the open market. As approved by the TSX, WestJet is authorized to
purchase up to 2,500,000 shares (representing approximately 1.9% of its
issued and outstanding shares at the time of the bid) during the period
of March 17, 2008 to March 16, 2009, or until such earlier time as the
bid is completed or terminated at the option of WestJet. Any shares
WestJet purchases under this bid will be purchased on the open market
through the facilities of the TSX at the prevailing market price at the
time of the transaction. Shares acquired under this bid will be
cancelled. During the three and six months ended June 30, 2008, the
Corporation purchased 2,005,084 shares under the bid for total
consideration of $29,420. The average book value of the shares
repurchased of $7,091 was charged to share capital with the $22,329
excess of the market price over the average book value charged to
retained earnings.

During the three and six months ended June 30, 2007, the Corporation
purchased 745,700 shares under its previous normal course issuer bid,
which expired on February 27, 2008, for total consideration of $11,806.
The average book value for the shares repurchased of $2,503 was charged
to share capital with the $9,303 excess of the market price over the
average book value charged to retained earnings.

(b) Per share amounts

The following table summarizes the shares used in calculating net
earnings per share:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
-------------------------------------------------------------------------
Weighted average number
of shares outstanding
- basic 129,269,317 129,870,817 129,481,874 129,827,284
Effect of dilutive
employee stock options
and unit plans 1,537,514 1,240,874 2,145,074 827,102
-------------------------------------------------------------------------
Weighted average number
of shares outstanding
- diluted 130,806,831 131,111,691 131,626,948 130,654,386
-------------------------------------------------------------------------
-------------------------------------------------------------------------

For the three and six months ended June 30, 2008, 3,609,638 and 2,573,456
employee stock options, respectively, and 48,300 and 48,300 restricted
share units, respectively, (three months ended June 30, 2007 - 2,041,356
employee stock options; six months ended June 30, 2007 - 4,823,034
employee stock options) were not included in the calculation of dilutive
potential shares as the result would be anti-dilutive.

(c) Stock option plan

Changes in the number of options, with their weighted average exercise
prices, are summarized below:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
June 30, 2008 June 30, 2008
-------------------------------------------------------------------------
Weighted Weighted
average average
Number of exercise Number of exercise
options price options price
-------------------------------------------------------------------------
Stock options outstanding,
beginning of period 11,393,770 $ 13.54 12,226,232 $ 13.66
Granted 1,957,423 16.68 1,965,579 16.69
Exercised (1,067,701) 15.18 (1,881,528) 15.28
Forfeited (36,551) 12.45 (63,342) 12.71
Expired (14,624) 15.58 (14,624) 15.58
-------------------------------------------------------------------------
Stock options outstanding,
end of period 12,232,317 $ 13.90 12,232,317 $ 13.90
-------------------------------------------------------------------------
Exercisable, end of
period 8,074,443 $ 12.87 8,074,443 $ 12.87
-------------------------------------------------------------------------
-------------------------------------------------------------------------

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
June 30, 2007 June 30, 2007
-------------------------------------------------------------------------
Weighted Weighted
average average
Number of exercise Number of exercise
options price options price
-------------------------------------------------------------------------
Stock options outstanding,
beginning of period 13,964,545 $ 13.35 15,046,201 $ 13.21
Granted 1,634,999 16.43 1,645,958 16.42
Exercised (1,342,644) 11.44 (2,304,196) 11.35
Forfeited (25,032) 13.98 (156,095) 13.00
-------------------------------------------------------------------------
Stock options outstanding,
end of period 14,231,868 $ 13.89 14,231,868 $ 13.89
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Exercisable, end of
period 6,351,375 $ 15.08 6,351,375 $ 15.08
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Under the terms of the Corporation's stock option plan, a cashless
settlement alternative is available, whereby option holders can either
(i) elect to receive shares by delivering cash to the Corporation in the
amount of the options, or (ii) elect to receive a number of shares
equivalent to the market value of the options over the exercise price.
For the three and six months ended June 30, 2008, option holders
exercised 1,053,337 and 1,867,164 options, respectively, (three months
ended June 30, 2007 - 1,222,877 options; six months ended June 30, 2007 -
2,173,400 options) on a cashless settlement basis and received 116,451
and 310,376 shares, respectively (three months ended June 30, 2007 -
373,870; six months ended June 30, 2008 - 616,475 shares). During the
three and six months ended June 30, 2008, 14,364 options were exercised
on a cash basis (three months ended June 30, 2007 - 119,767 options; six
months ended June 30, 2007 - 130,796 options).

(d) Stock option compensation

As new options are granted, the fair market value of the options is
expensed over the vesting period, with an offsetting entry to contributed
surplus. The fair market value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing model. Upon the
exercise of stock options, consideration received, together with amounts
previously recorded in contributed surplus, is recorded as an increase to
share capital.

Stock-based compensation expense related to stock options included in
flight operations and navigational charges and marketing, general and
administration expenses totalled $3,427 and $7,574 for the three and six
months ended June 30, 2008, respectively (three months ended June 30,
2007 - $5,351; six months ended June 30, 2007 - $10,801).

The fair market value of options granted during the three and six months
ended June 30, 2008 and 2007 and the assumptions used in their
determination are as follows:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
-------------------------------------------------------------------------
Weighted average fair
market value per option $ 5.24 $ 5.65 $ 5.24 $ 5.65
Average risk-free
interest rate 3.0% 4.2% 3.0% 4.2%
Average volatility 37% 38% 37% 38%
Expected life (years) 3.6 3.7 3.6 3.7
Dividends per share $ - $ - $ - $ -
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(e) Executive share unit plan

During the six months ended June 30, 2008, the Board of Directors
approved the 2008 Executive Share Unit Plan whereby up to a maximum of
200,000 Restricted Share Units (RSU) and Performance Share Units (PSU)
combined may be issued to senior executive officers of the Corporation.

2008 Restricted share units

Each RSU entitles the executive to receive payment upon vesting in the
form of voting shares of the Corporation. The Corporation determines
compensation expense for the 2008 RSUs based on the fair market value of
the Corporation's voting shares on the date of grant. The 2008 RSUs vest
at the end of a three-year period, with compensation expense being
recognized in earnings on a straight-line basis over the vesting period.
For the three and six months ended June 30, 2008, nil and 54,277,
respectively, RSUs were granted under this plan at a weighted average
fair market value of $19.45 per unit, with $78 and $227, respectively, of
compensation expense included in marketing, general and administration
expense.

Performance share units

Each PSU entitles the executive to receive payment upon vesting in the
form of voting shares of the Corporation. The value of the PSUs is based
on the fair market value of the Corporation's voting shares on the date
of grant. PSUs time vest at the end of a three-year term and incorporate
performance criteria based upon achieving the compounded average diluted
earnings per share growth rate targets established at the time of grant.
For the three and six months ended June 30, 2008, nil and 72,369,
respectively, PSUs were granted under this plan at a weighted average
fair market value of $19.45 per unit, with $91 and $318, respectively, of
ompensation expense included in marketing, general and administration
expense.

8. Related party transactions

The Corporation has debt financing and investments in short-term deposits
with a financial institution that is related through two common
directors, one of whom is also the president of the financial
institution. As at June 30, 2008, total long-term debt includes an amount
of $21,754 (December 31, 2007 - $23,325) due to the financial
institution. See note 6, long-term debt for further disclosure. Included
in cash and cash equivalents as at June 30, 2008 are short-term
investments of $234,075 (December 31, 2007 - $189,389) owing from the
financial institution. These transactions occurred in the normal course
of operations with terms consistent with those offered to arm's length
parties and are measured at the exchange amount.

9. Commitments and contingencies

(a) Purchased aircraft

As at June 30, 2008, the Corporation is committed to purchase 25 737-700
aircraft for delivery between 2008 and 2013. The remaining estimated
amounts to be paid in deposits and purchase prices for the 25 aircraft,
as well as amounts to be paid for live satellite television systems on
purchased and leased aircraft in Canadian dollars and the US-dollar
equivalent, are as follows:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
US dollar CAD dollar
-------------------------------------------------------------------------
2008 $ 39,048 $ 39,817
2009 24,273 24,751
2010 113,666 115,906
2011 153,786 156,816
2012 525,760 536,117
2013 220,671 225,018
-------------------------------------------------------------------------
$ 1,077,204 $ 1,098,425
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(b) Operating leases

The Corporation has entered into operating leases and agreements for
aircraft, buildings, computer hardware, software licences and satellite
programming. As at June 30, 2008, the future payments, in Canadian
dollars and when applicable the US-dollar equivalent, under operating
leases are as follows:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
US dollar CAD dollar
-------------------------------------------------------------------------
2008 $ 52,039 $ 62,574
2009 127,040 142,210
2010 154,393 165,341
2011 172,815 180,239
2012 179,142 185,483
2013 and thereafter 743,173 775,937
-------------------------------------------------------------------------
$ 1,428,602 $ 1,511,784
-------------------------------------------------------------------------
-------------------------------------------------------------------------

As at June 30, 2008, the Corporation is committed to lease an additional
15 737-700 aircraft and five 737-800 aircraft to be delivered between
2008 and 2011 for terms ranging between eight and 10 years in US dollars.
These aircraft have been included in the above totals.

(c) Contingencies

On February 29, 2008, the Corporation signed a letter of intent to lease
one 737-800 aircraft over a term of eight years commencing in March 2011
for an estimated total commitment of US $39 million.

The Corporation is party to legal proceedings and claims that arise
during the ordinary course of business. It is the opinion of management
that the ultimate outcome of these and any outstanding matters will not
have a material effect upon the Corporation's financial position, results
of operations or cash flows.

10. Financial instruments and risk management

(a) Fair value of financial assets and financial liabilities

The Corporation's financial assets and liabilities consist primarily of
cash and cash equivalents, accounts receivable, cash flow hedges, US-
dollar deposits, accounts payable and accrued liabilities and long-term
debt. The following table sets out the Corporation's classification based
on the measurement categories found in CICA Handbook Section 3855,
Financial Instruments - Recognition and Measurement, and the carrying
amount for each of its financial assets and liabilities as at June 30,
2008:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other Total
Held Loans and financial carrying
for trading receivables liabilities amount
-------------------------------------------------------------------------
Asset (liability)

Cash and cash
equivalents $ 811,990 $ - $ - $ 811,990
Accounts receivable - 21,450 - 21,450
Cash flow hedges(i) 461 - - 461
US-dollar deposits (ii) 23,972 - - 23,972
Accounts payable and
accrued liabilities - - (192,958) (192,958)
Long-term debt(iii) - - (1,414,583) (1,414,583)
-------------------------------------------------------------------------
$ 836,423 $ 21,450 $(1,607,541) $ (749,668)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(i) Foreign exchange forward contracts used for hedging included in
prepaid expenses, deposits and other.
(ii) Includes $2,039 classified in prepaid expenses, deposits and other
and $21,933 classified in other assets.
(iii) Includes current portion of long-term debt of $177,449 and long-
term portion of $1,237,134.

The fair values of financial assets and liabilities, together with
carrying amounts, shown in the balance sheet as at June 30, 2008 and
December 31, 2007, are as follows:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
June 30, 2008 December 31, 2007
Carrying Fair Carrying Fair
amount value amount value
-------------------------------------------------------------------------
Asset (liability)

Cash and cash (i)
equivalents $ 811,990 $ 811,990 $ 653,558 $ 653,558
Accounts
receivable (i) 21,450 21,450 15,009 15,009
Cash flow hedges (ii) 461 461 106 106
US-dollar
deposits (iii) 23,972 23,972 22,748 22,748
Accounts payable (iv)
and accrued
liabilities (192,958) (192,958) (168,171) (168,171)
Long-term debt (v) (1,414,583) (1,487,293) (1,429,518) (1,473,997)
-------------------------------------------------------------------------
$(749,668) $(822,378) $(906,268) $(950,747)
-------------------------------------------------------------------------
Unrecognized loss $ (72,710) $ (44,479)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The fair values of financial instruments are calculated on the basis of
information available on the balance sheet date using the following
methods:

(i) The fair value of cash and cash equivalents and accounts
receivable approximates their carrying amounts due to the short-
term nature of the instruments.

(ii) The fair value of the forward exchange contracts is measured based
on the difference between the contracted rate and the forward rate
obtained from the counterparty at the balance-sheet date. Due to
the short-term nature of the outstanding contracts, no discount
rate has been applied. Forward rates at June 30, 2008, range
between 0.9925 and 1.0136 (December 31, 2007 - between 0.9906 and
0.9909) US dollars to Canadian dollars.

(iii) The fair value of the US-dollar deposits, which relate to
purchased aircraft, approximates their carrying amounts as they
are at a floating market rate of interest.

(iv) The fair value of accounts payable and accrued liabilities
approximates their carrying amounts due to the short-term nature
of the instruments.

(v) The fair value of the Corporation's fixed-rate long-term debt is
determined by discounting the future contractual cash flows under
current financing arrangements at discount rates obtained from the
lender, which represent borrowing rates presently available to the
Corporation for loans with similar terms and remaining maturities.
At June 30, 2008, rates used in determining the fair value ranged
from 3.98% to 4.19% (December 31, 2007 - from 4.52% to 4.61%). The
fair value of the Corporation's variable rate long-term debt
approximates its carrying value as it is at a floating market rate
of interest.

(b) Risk management

The Corporation is exposed to market, credit and liquidity risks
associated with its financial instruments. The Corporation will from time
to time use various financial instruments to reduce market risk exposures
from changes in foreign currency exchange rates, interest rates and jet
fuel prices. The Corporation does not hold or use any derivative
instruments for trading or speculative purposes.

Overall, the Corporation's Board of Directors has responsibility for the
establishment and approval of the Corporation's risk management policies.
Management performs a risk assessment on a continual basis to ensure that
all significant risks related to the Corporation and its operations have
been reviewed and assessed to reflect changes in market conditions and
the Corporation's operating activities.

Fuel risk

The airline industry is inherently dependent upon jet fuel to operate,
and is therefore impacted by changes in jet fuel prices. Aircraft fuel
expense for the three and six months ended June 30, 2008, represented
approximately 38% and 35%, respectively, (three months ended June 30,
2007 - 26%; six months ended June 30, 2007 - 26%) of the Corporation's
total operating expenses. For the three and six months ended June 30,
2008, the Corporation's average jet fuel cost per litre was $1.04 and
$0.93, respectively (three months ended June 30, 2007 - $0.69; six months
ended June 30, 2007 - $0.67).

A significant change in the price of jet fuel could significantly impact
the Corporation's financial results. For the three and six months ended
June 30, 2008, WestJet estimates that a one-cent-per-litre change in the
price of jet fuel would have increased or decreased the Corporation's net
earnings by approximately $1.4 million and $2.8 million, respectively
(three months ended June 30, 2007 - $1.2 million; six months ended
June 30, 2007 - $2.3 million). This is assuming that all other variables,
in particular, foreign currency rates, remain constant. The increase in
sensitivity from 2007 is a result of the overall increase in the
Corporation's capacity and fuel consumption during the period.

Fuel prices will continue to be susceptible to political events, weather
conditions, refinery capacity, worldwide demand and other factors that
can affect the supply of jet fuel. To mitigate exposure to fluctuations
in jet fuel prices, the Corporation periodically uses short-term
financial and physical derivatives. As at, and for the three and six
months ended June 30, 2008, the Corporation has no outstanding fuel
hedges.

Foreign currency exchange risk

Foreign currency exchange risk is the risk that the fair value of
recognized assets and liabilities or future cash flows would fluctuate as
a result of changes in foreign exchange rates. The Corporation is exposed
to foreign currency exchange risks arising from fluctuations in exchange
rates on its US-dollar denominated capital purchases and operating
expenditures, mainly aircraft fuel, aircraft leasing expense, certain
maintenance costs and a portion of airport operation costs. During the
three and six month periods ended June 30, 2008, the average US-dollar
rate was 1.0103 and 1.0070, respectively, (three months ended June 30,
2007 - 1.0990; six months ended June 30, 2007 - 1.1358) with the period-
end exchange rate at 1.0197 (June 30, 2007 - 1.0588).

For the three and six months ended June 30, 2008, WestJet estimates that
a one-cent change in the value of the US dollar versus the Canadian
dollar would have increased or decreased net earnings by $1.5 million and
$2.7 million, respectively, (three months ended June 30, 2007 -
$0.9 million; six months ended June 30, 2007 - $1.6 million) that is,
$1.4 million and $2.4 million as a result of fuel (three months ended
June 30, 2007 - $0.7 million; six months ended June 30, 2007 -
$1.2 million) and $0.1 million and $0.3 million for all remaining costs
(three months ended June 30, 2007 - $0.2 million; six months ended June
30, 2007 - $0.4 million). This is assuming that all other variables
remain constant. The increase in sensitivity from 2007 is mainly a result
of the increase in the price of jet fuel valued in US dollars.

The foreign exchange gains and losses realized are mainly attributable to
the effect of the changes in the value of our US-dollar denominated net
monetary assets. As at June 30, 2008, US-dollar denominated net monetary
assets totalled approximately US $116.9 million (June 30, 2007 -
US $78.3 million). For the three and six months ended June 30, 2008, the
Corporation estimates that a one-cent change in the value of the
US dollar versus the Canadian dollar would have increased or decreased
net earnings by $0.7 million and $1.3 million, respectively, (three
months ended June 30, 2007 - $0.5 million; six months ended June 30, 2007
- $0.9 million) as a result of the Corporation's US-dollar denominated
net monetary assets.

To manage its exposure to foreign currency, the Corporation periodically
uses financial derivatives, including US-dollar forward contracts. Upon
proper qualification, the forward contracts are designated as cash flow
hedges and qualify for hedge accounting. As at June 30, 2008, to offset
its US-dollar denominated aircraft lease payments, the Corporation
entered into forward contracts to purchase US $5.9 million per month for
four months for a total of US $23.6 million at an average forward rate of
1.0036 per US dollar. Maturity dates for all contracts are within 2008.
For the three and six months ended June 30, 2008, the Corporation
realized a total gain on the contracts of $150 and $470 respectively,
included in aircraft leasing costs. As at June 30, 2008, the estimated
fair market value of the remaining contracts recorded in prepaid
expenses, deposits and other is a gain of $461 ($319 net of tax) to be
realized in 2008. Due to the immaterial balance of the forward contracts,
a change in the US-dollar exchange rate for the three and six months
ended June 30, 2008, would not have significantly impacted the
Corporation's net earnings and other comprehensive income.

Interest rate risk

Interest rate risk is the risk that earnings will fluctuate as a result
of changes in market interest rates.

(i) Long-term debt

The fixed-rate nature of the majority of the Corporation's long-term debt
reduces the risk of interest rate fluctuations over the term of the
outstanding debt. The Corporation accounts for its long-term fixed-rate
debt at amortized cost, and therefore, a change in interest rates at
June 30, 2008, would not affect net earnings.

The Corporation is exposed to interest rate fluctuations on its variable-
rate long-term debt, which at June 30, 2008 totalled $26,836
(June 30, 2007 - $32,300) or 1.9% (June 30, 2007 - 2.4%) of the
Corporation's total long-term debt. Due to the immaterial balance of the
variable-rate long-term debt, a change in market interest rates for the
three and six months ended June 30, 2008, would not have significantly
impacted the Corporation's net earnings.

(ii) Cash and cash equivalents

The Corporation is exposed to interest rate fluctuations on its cash and
cash equivalents balance, which at June 30, 2008 totalled $811,990
(June 30, 2007 - $545,976). A change of 50 basis points in the market
interest rate would have had, for the three and six months ended June 30,
2008, an approximate impact on net earnings of $0.6 million and
$1.2 million, respectively (three months ended June 30, 2007 -
$0.4 million; six months ended June 30, 2007 - $0.7 million). The
increase in sensitivity from 2007 is a direct result of the increase in
the balance of the Corporation's cash and cash equivalents balance.

Credit risk

Credit risk is the risk that one party to a financial instrument will
cause a financial loss for the other party by failing to discharge an
obligation. The Corporation does not believe it is subject to significant
concentration of credit risk on its cash and cash equivalents and
accounts receivable balances. The carrying amount of accounts receivable
and cash and cash equivalents balances represents the maximum credit
exposure.

(i) Cash and cash equivalents

Cash and cash equivalents consist of cash bank balances and short-term
investments with terms of up to 91 days. It is the Corporation's policy
to hold investments with maturities of no more than 91 days with the
majority between 30 and 60 days. The Corporation purchases short-term
investments through Schedule I and selected Schedule II banks, as defined
by the Canadian Bankers Association. As at June 30, 2008, the Corporation
had a total principal amount invested of $692,696 in Canadian-dollar
short-term investments with terms ranging between four and 91 days and a
total of US $50,547 invested in US-dollar short-term investments with
terms ranging between two and 90 days.

As at, and for the three and six months ended June 30, 2008, the
Corporation did not have any investments in asset-backed commercial
paper.

The Corporation does not expect any counterparties to fail to meet their
obligations.

(ii) Accounts receivable

Generally, the Corporation's accounts receivable result from tickets sold
to individual guests through the use of travel agents. Purchase limits
are established for each agent and in some cases, when deemed necessary,
a letter of credit is required. At June 30, 2008, the Corporation's
accounts receivable totalled $21,450 (December 31, 2007 - $15,009),
approximately 50% (December 31, 2007 - 30%) being due from travel agents.
These receivables are short-term in nature, generally being settled
within four weeks from the date of booking. As at June 30, 2008, the
Corporation has a total of $2,074 (December 31, 2007 - $2,309) in letters
of credit from travel agents.

Liquidity risk

Liquidity risk is the risk that the Corporation will encounter difficulty
in meeting obligations associated with financial liabilities. The
Corporation maintains a strong liquidity position and maintains
sufficient financial resources to meet its obligations as they fall due.

Inherent in the airline industry is the high cost of capital and the
volatility of aircraft fuel prices. To mitigate exposure to this
challenge, the Corporation has secured low-interest-rate fixed debt
supported by Ex-Im Bank commitments on its aircraft acquisitions. See
note 6, long-term debt, for further detail.

The Corporation's total accounts payable and accrued liabilities are
classified as current and as such will be settled within one year. For
detailed information on the Corporation's long-term contractual financial
liabilities, including a schedule of future repayments, see note 6, long-
term debt. Refer to note 9, commitments and contingencies, for a
commitment schedule of the Corporation's off-balance-sheet operating
commitments, including its aircraft operating leases.

A portion of the Corporation's cash and cash equivalents balance relates
to cash collected with respect to advance ticket sales, for which the
balance at June 30, 2008 was $323,372 (December 31, 2007 - $194,929).
Typically, the Corporation has cash and cash equivalents on hand to have
sufficient liquidity to meet its liabilities when due, under both normal
and stressed conditions. At June 30, 2008, the Corporation had cash on
hand of 2.51 times (December 31, 2007 - 3.35 times) the advance ticket
sales balance.

The Corporation aims to maintain a current ratio, defined as current
assets over current liabilities, of at least 1.00. At June 30, 2008, the
Corporation's current ratio was 1.20 (December 31, 2007 - 1.22).

11. Subsequent events

Subsequent to June 30, 2008, the Corporation entered into a mixture of
costless collar structures with an approximate average crude oil call
price of US $159.00 per barrel and an average crude oil put price of
US $128.00 per barrel, and fixed swap agreements at an approximate
average crude oil price of US $136.00 per barrel to hedge a portion of
its anticipated jet fuel purchases to the end of September 2008.
>>

Conference Call

WestJet will hold a live analysts' conference call today at 9 a.m. MT (11
a.m. ET). Sean Durfy, President and CEO, and Vito Culmone, Executive
Vice-President, Finance and CFO, will discuss WestJet's second quarter 2008
results and answer questions from financial analysts. The conference call is
available through the toll-free telephone number 1-800-926-7748. Participants
are encouraged to join the call 10 minutes prior to the scheduled start at
8:50 a.m. MT (10:50 ET). The call can also be heard live through an Internet
webcast in the Investor Relations section of westjet.com.

About WestJet

WestJet is Canada's leading high-value low-cost airline offering
scheduled service throughout its 51-city North American and Caribbean network.
Named Canada's most admired corporate culture in 2005, 2006 and 2007, WestJet
pioneered low-cost flying in Canada. WestJet offers increased legroom and
leather seats on its modern fleet of 76 Boeing Next-Generation 737 aircraft,
and live seatback television provided by Bell ExpressVu. With future confirmed
deliveries for an additional 45 aircraft, bringing its fleet to 121 by 2013,
WestJet strives to be the number one choice for travellers.